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A fractional calculus interpretation of the fractional volatility model

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Abstract

Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data. Here, the model is formulated in terms of a fractional integration of stochastic processes.

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Authors and Affiliations

  1. Centro de Matemática e Aplicações Fundamentais, Complexo Interdisciplinar, Universidade de Lisboa, Av. Prof. Gama Pinto 2, 1649-003, Lisbon, Portugal

    R. Vilela Mendes

  2. Universidade Técnica de Lisboa, Lisbon, Portugal

    R. Vilela Mendes

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  1. R. Vilela Mendes
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Correspondence to R. Vilela Mendes.

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Vilela Mendes, R. A fractional calculus interpretation of the fractional volatility model. Nonlinear Dyn 55, 395–399 (2009). https://doi.org/10.1007/s11071-008-9372-0

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  • DOI: https://doi.org/10.1007/s11071-008-9372-0

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