Download This PaperA Data-Reconstructed Fractional Volatility Model
20 Pages Posted: 13 Dec 2010
Date Written: 2008
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.
Keywords: Fractional noise, induced volatility, statistics of returns, option pricing
JEL Classification: C51, G14, G12
Suggested Citation: Suggested Citation
Mendes, Rui Vilela and Ordóñez Monfort, Javier, A Data-Reconstructed Fractional Volatility Model (2008). Economics Discussion Paper No. 2008-22, Available at SSRN: https://ssrn.com/abstract=1723640 or http://dx.doi.org/10.2139/ssrn.1723640
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.