The quadratic rough Heston model and the joint S&P 500/VIX smile calibration problem

Jim Gatheral, Paul Jusselin and Mathieu Rosenbaum

Papers from arXiv.org

Abstract: Fitting simultaneously SPX and VIX smiles is known to be one of the most challenging problems in volatility modeling. A long-standing conjecture due to Julien Guyon is that it may not be possible to calibrate jointly these two quantities with a model with continuous sample-paths. We present the quadratic rough Heston model as a counterexample to this conjecture. The key idea is the combination of rough volatility together with a price-feedback (Zumbach) effect.

Date: 2020-01
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Citations: View citations in EconPapers (26)

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