A data-reconstructed fractional volatility model

• DOI: 10.48550/arxiv.math/0602013
• Publication Date: 2006-01-01
• Authors: R. Vilela Mendes; Maria João Oliveira
• Keywords: Heston model

Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the process being driven by fractional noise. Price return statistics asymptotic behavior are derived from compared data. Deviations Black-Scholes new option pricing formula also obtained