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Rough Volatility: Fact or Artefact?

Author

Listed:
  • Rama Cont

    (University of Oxford)

  • Purba Das

    (King’s College London)

Abstract

We investigate the statistical evidence for the use of ‘rough’ fractional processes with Hurst exponent $$H

Suggested Citation

  • Rama Cont & Purba Das, 2024. "Rough Volatility: Fact or Artefact?," Sankhya B: The Indian Journal of Statistics, Springer;Indian Statistical Institute, vol. 86(1), pages 191-223, May.
    • Handle: RePEc:spr:sankhb:v:86:y:2024:i:1:d:10.1007_s13571-024-00322-2
    DOI: 10.1007/s13571-024-00322-2
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    References listed on IDEAS

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    1. Mikkel Bennedsen & Asger Lunde & Mikko S Pakkanen, 2022. "Decoupling the Short- and Long-Term Behavior of Stochastic Volatility [Multifactor Approximation of Rough Volatility Models]," Journal of Financial Econometrics, Oxford University Press, vol. 20(5), pages 961-1006.
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    5. Bolko, Anine E. & Christensen, Kim & Pakkanen, Mikko S. & Veliyev, Bezirgen, 2023. "A GMM approach to estimate the roughness of stochastic volatility," Journal of Econometrics, Elsevier, vol. 235(2), pages 745-778.
    6. Ole E. Barndorff‐Nielsen & Neil Shephard, 2002. "Econometric analysis of realized volatility and its use in estimating stochastic volatility models," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 64(2), pages 253-280, May.
    7. Bollerslev, Tim & Ole Mikkelsen, Hans, 1996. "Modeling and pricing long memory in stock market volatility," Journal of Econometrics, Elsevier, vol. 73(1), pages 151-184, July.
    8. Breidt, F. Jay & Crato, Nuno & de Lima, Pedro, 1998. "The detection and estimation of long memory in stochastic volatility," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 325-348.
    9. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
    10. Lahiri, Ananya & Sen, Rituparna, 2020. "Fractional Brownian markets with time-varying volatility and high-frequency data," Econometrics and Statistics, Elsevier, vol. 16(C), pages 91-107.
    11. Masaaki Fukasawa & Tetsuya Takabatake & Rebecca Westphal, 2022. "Consistent estimation for fractional stochastic volatility model under high‐frequency asymptotics," Mathematical Finance, Wiley Blackwell, vol. 32(4), pages 1086-1132, October.
    12. Rama Cont, 2007. "Volatility Clustering in Financial Markets: Empirical Facts and Agent-Based Models," Springer Books, in: Gilles Teyssière & Alan P. Kirman (ed.), Long Memory in Economics, pages 289-309, Springer.
    13. Alan L. Lewis, 2000. "Option Valuation under Stochastic Volatility," Option Valuation under Stochastic Volatility, Finance Press, number ovsv.
    14. L. C. G. Rogers, 1997. "Arbitrage with Fractional Brownian Motion," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 95-105, January.
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    Cited by:

    1. Xiyue Han & Alexander Schied, 2025. "On the rate of convergence of estimating the Hurst parameter of rough stochastic volatility models," Papers 2504.09276, arXiv.org.
    2. Florian Aichinger & Sascha Desmettre, 2025. "Pricing of geometric Asian options in the Volterra-Heston model," Review of Derivatives Research, Springer, vol. 28(1), pages 1-30, April.

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