Correlated log-normal random variables under a multiscale volatility model (Q2247624)

Summary: The study focuses on extending the fast mean-reversion volatility, which was developed by the author in a previous work [Adv. Math. Phys. 2017, Article ID 7150203, 7 p. (2017; Zbl 1404.62143)], to the multiscale volatility model so that it can express a well-separated time scale. The leading-order term and first-order correction terms are analytically computed using the perturbation theory based on the Lie-Trotter operator splitting method. Finally, the study is concluded by deriving the numerical results that further validate the effectiveness of the model.