No-arbitrage, leverage and completeness in a fractional volatility model

Rui Mendes, M.J. Oliveira and A.M. Rodrigues

Physica A: Statistical Mechanics and its Applications, 2015, vol. 419, issue C, 470-478

Abstract: When the volatility process is driven by fractional noise one obtains a model which is consistent with the empirical market data. Depending on whether the stochasticity generators of log-price and volatility are independent or are the same, two versions of the model are obtained with different leverage behaviors. Here, the no-arbitrage and completeness properties of the models are rigorously studied.

Keywords: Fractional noise; Arbitrage; Market completeness (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:419:y:2015:i:c:p:470-478

DOI: 10.1016/j.physa.2014.10.056

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