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On the weak convergence rate in the discretization of rough volatility models

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  • Christian Bayer
  • Masaaki Fukasawa
  • Shonosuke Nakahara

Abstract

We study the weak convergence rate in the discretization of rough volatility models. After showing a lower bound $2H$ under a general model, where $H$ is the Hurst index of the volatility process, we give a sharper bound $H + 1/2$ under a linear model.

Suggested Citation

  • Christian Bayer & Masaaki Fukasawa & Shonosuke Nakahara, 2022. "On the weak convergence rate in the discretization of rough volatility models," Papers 2203.02943, arXiv.org.
    • Handle: RePEc:arx:papers:2203.02943
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    References listed on IDEAS

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    1. Masaaki Fukasawa, 2021. "Volatility has to be rough," Quantitative Finance, Taylor & Francis Journals, vol. 21(1), pages 1-8, January.
    2. Christian Bayer & Peter Friz & Jim Gatheral, 2016. "Pricing under rough volatility," Quantitative Finance, Taylor & Francis Journals, vol. 16(6), pages 887-904, June.
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    Cited by:

    1. Ofelia Bonesini & Antoine Jacquier & Alexandre Pannier, 2023. "Rough volatility, path-dependent PDEs and weak rates of convergence," Papers 2304.03042, arXiv.org.
    2. Paul Gassiat, 2022. "Weak error rates of numerical schemes for rough volatility," Papers 2203.09298, arXiv.org, revised Feb 2023.
    3. Peter K. Friz & William Salkeld & Thomas Wagenhofer, 2022. "Weak error estimates for rough volatility models," Papers 2212.01591, arXiv.org.

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