Large deviations for fractional volatility models with non-Gaussian volatility driver

Stefan Gerhold, Christoph Gerstenecker and Archil Gulisashvili

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Abstract: We study stochastic volatility models in which the volatility process is a function of a continuous fractional stochastic process, which is an integral transform of the solution of an SDE satisfying the Yamada-Watanabe condition. We establish a small-noise large deviation principle for the log-price, and, for a special case of our setup, obtain logarithmic call price asymptotics for large strikes.

Date: 2020-03
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2003.12825

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