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Preprint
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Fractional Riccati Equation and Its Applications to Rough Heston Model
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A peer-reviewed article of this preprint also exists.
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Abstract
Rough volatility models are popularized by \cite{gatheral2018volatility}, where they have shown that the empirical volatility in the financial market is extremely consistent with rough volatility. Fractional Riccati equation as a part of computation for the characteristic function of rough Heston model is not known in explicit form as of now and therefore, we must rely on numerical methods to obtain a solution. In this paper, we give a short introduction to option pricing theory and an overview of the current advancements on the rough Heston model.
Keywords:
Subject: Computer Science and Mathematics - Applied Mathematics
Copyright: This open access article is published under a Creative Commons CC BY 4.0 license, which permit the free download, distribution, and reuse, provided that the author and preprint are cited in any reuse.
Submitted:
22 February 2020
Posted:
23 February 2020
You are already at the latest version
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A peer-reviewed article of this preprint also exists.
This version is not peer-reviewed
Submitted:
22 February 2020
Posted:
23 February 2020
You are already at the latest version
Alerts
Abstract
Rough volatility models are popularized by \cite{gatheral2018volatility}, where they have shown that the empirical volatility in the financial market is extremely consistent with rough volatility. Fractional Riccati equation as a part of computation for the characteristic function of rough Heston model is not known in explicit form as of now and therefore, we must rely on numerical methods to obtain a solution. In this paper, we give a short introduction to option pricing theory and an overview of the current advancements on the rough Heston model.
Keywords:
Subject: Computer Science and Mathematics - Applied Mathematics
Copyright: This open access article is published under a Creative Commons CC BY 4.0 license, which permit the free download, distribution, and reuse, provided that the author and preprint are cited in any reuse.
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