THE FRACTIONAL VOLATILITY MODEL AND ROUGH VOLATILITY

R. Vilela Mendes ()
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R. Vilela Mendes: CMAFcIO, Faculdade de Ciências, Universidade de Lisboa, Lisbon, Portugal

International Journal of Theoretical and Applied Finance (IJTAF), 2023, vol. 26, issue 02n03, 1-12

Abstract: The question of the volatility roughness is interpreted in the framework of a data-reconstructed fractional volatility model, where volatility is driven by fractional noise. Some examples are worked out and, using the Malliavin calculus for fractional processes, an option pricing equation and its solution are obtained.

Keywords: Stochastic volatility; fractional noise; rough volatility (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0219024923500103

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