Martingale expansion for stochastic volatility

Masaaki Fukasawa

Papers from arXiv.org

Abstract: The martingale expansion provides a refined approximation to the marginal distributions of martingales beyond the normal approximation implied by the martingale central limit theorem. We develop a martingale expansion framework specifically suited to continuous stochastic volatility models. Our approach accommodates both small volatility-of-volatility and fast mean-reversion models, yielding first-order perturbation expansions under essentially minimal conditions.

Date: 2026-01, Revised 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2601.09324

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