A data-reconstructed fractional volatility model

Rui Mendes and M. J. Oliveira

Papers from arXiv.org

Abstract: Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior are derived from the model and compared with data. Deviations from Black-Scholes and a new option pricing formula are also obtained

Date: 2006-02, Revised 2007-06
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:math/0602013

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