The fractional volatility model: No-arbitrage, leverage and risk measures
AbstractBased on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity generators of log-price and volatility are independent or are the same, two versions of the model are obtained with different leverage behavior. Here, the no-arbitrage and incompleteness properties of the model are studied. Some risk measures are also discussed in this framework.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1007.2817.
Date of creation: Jul 2010
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Web page: http://arxiv.org/
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