Pseudo rough vol-of-vol through Markovian approximation

Guerreiro, Henrique; Guerra, João

http://hdl.handle.net/10400.5/30181

Utilize este identificador para referenciar este registo.

Nome:	Descrição:	Tamanho:	Formato:
REM_WP_0310_2024.pdf		1.01 MB	Adobe PDF	Ver/Abrir

Contacte-nos

Autores

Guerreiro, Henrique

Guerra, João

Resumo(s)

We discuss a possible framework for a (pseudo) rough vol-of-vol model through a multi-factor Markovian approximation of the vol-of-vol process. We identify a key martingale condition which may allow to express the VIX in terms of the solution of a certain Riccati ordinary differential equation. We derive this equation and provide sufficient conditions for the existence of solutions. We also provide some partial results regarding the martingale condition. In particular, we verify a local martingale condition.

Palavras-chave

VIX rough volatility Markovian approximation exponentially affine process

URI

http://hdl.handle.net/10400.5/30181

Citação

Guerreiro, Henrique e João Guerra (2024). "Pseudo rough vol-of-vol through Markovian approximation". REM Working paper series, nº 0310/2024

Editora

ISEG – REM (Research in Economics and Mathematics)

Coleções

REM - REM Working Papers Series

Ver registo completo