Gaussian stochastic volatility models: scaling regimes, large deviations, and moment explosions

DOI10.1016/J.SPA.2019.10.005MaRDI QIDQ2175333zbMATH OpenOpenAlexWikidataFDO

Authors Archil Gulisashvili

Publication date 29 April 2020

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1808.00421

zbMATH Keywords

implied volatility asymptoticsVolterra type modelsGaussian stochastic volatility modelscentral limit regimemoment explosionssample path large and moderate deviations

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Large deviations (60F10) Gaussian processes (60G15) Fractional processes, including fractional Brownian motion (60G22) Asymptotic approximations, asymptotic expansions (steepest descent, etc.) (41A60) Self-similar stochastic processes (60G18)

Abstract: In this paper, we establish sample path large and moderate deviation principles for log-price processes in Gaussian stochastic volatility models, and study the asymptotic behavior of exit probabilities, call pricing functions, and the implied volatility. In addition, we prove that if the volatility function in an uncorrelated Gaussian model grows faster than linearly, then, for the asset price process, all the moments of order greater than one are infinite. Similar moment explosion results are obtained for correlated models.

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Cited in

(13)

• Asymptotics for multifactor Volterra type stochastic volatility models
• Extreme-strike asymptotics for general Gaussian stochastic volatility models
• Large deviations for fractional volatility models with non-Gaussian volatility driver
• Pathwise asymptotics for Volterra type stochastic volatility models
• Short-dated smile under rough volatility: asymptotics and numerics
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• On the martingale property in the rough Bergomi model
• Time-inhomogeneous Gaussian stochastic volatility models: large deviations and super roughness
• The characteristic function of Gaussian stochastic volatility models: an analytic expression
• Large deviation principles for stochastic volatility models with reflection
• Tauberian Korevaar
• Precise asymptotics: robust stochastic volatility models
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