Modelling H-Volatility with Fractional Brownian Bridge

Sergio Bianchi, Massimiliano Frezza (), Augusto Pianese and Anna Maria Palazzo
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Sergio Bianchi: Sapienza University of Rome, Department of MEMOTEF
Massimiliano Frezza: Sapienza University of Rome, Department of MEMOTEF
Augusto Pianese: University of Cassino and Southern Lazio, QuantLab
Anna Maria Palazzo: University of Cassino and Southern Lazio, QuantLab

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2022, pp 96-102 from Springer

Abstract: Abstract We express the realized volatility in terms of the Hurst exponent of the trajectory drawn by the market index. By analyzing distribution, stationarity, and (partial) sample autocorrelation of the estimated paths, and exploiting the empirical law of return to the central value 1/2, we model the dynamics of H(t) (and hence of the volatility) through a fractional Brownian bridge of appropriate parameter H.

Keywords: Hurst exponent; Fractional Brownian bridge; Volatility (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99638-3_16

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DOI: 10.1007/978-3-030-99638-3_16

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