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

DOI10.1016/J.SPA.2019.10.005zbMATH Open1434.60089OpenAlexW2980634307WikidataQ126999322 ScholiaQ126999322MaRDI QIDQ2175333FDOQ2175333

Authors: Archil Gulisashvili 

Publication date: 29 April 2020

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

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.

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

Recommendations

• Extreme-strike asymptotics for general Gaussian stochastic volatility models
• Moment explosions in stochastic volatility models
• Large deviations for fractional volatility models with non-Gaussian volatility driver
• Time-inhomogeneous Gaussian stochastic volatility models: large deviations and super roughness
• Moment explosions and long-term behavior of affine stochastic volatility models

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)

Cites Work

• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• A function space large deviation principle for certain stochastic integrals
• Approximating some Volterra type stochastic integrals with applications to parameter estimation.
• Asymptotic properties of the fractional Brownian motion of Riemann-Liouville type
• Asymptotics for Rough Stochastic Volatility Models
• Asymptotics of implied volatility to arbitrary order
• Correction to Black-Scholes formula due to fractional stochastic volatility
• Euler schemes and large deviations for stochastic Volterra equations with singular kernels
• Exit probabilities and optimal stochastic control
• Fractional Brownian Motions, Fractional Noises and Applications
• Fractional {O}rnstein-{U}hlenbeck processes
• General Freidlin-Wentzell large deviations and positive diffusions
• Large deviation principle for Volterra type fractional stochastic volatility models
• Large deviations techniques and applications.
• Lectures on Gaussian Processes
• Moderate Deviations for I.I.D. Random Variables
• ON SMALL RANDOM PERTURBATIONS OF DYNAMICAL SYSTEMS
• On fractional Ornstein-Uhlenbeck processes
• On small-noise equations with degenerate limiting system arising from volatility models
• On the Burkholder-Davis-Gundy inequalities for continuous martingales
• On the exponential Orlicz norms of stopped Brownian motion
• Option pricing in the moderate deviations regime
• Option pricing under fast-varying long-memory stochastic volatility
• Pathwise asymptotics for Volterra type stochastic volatility models
• Precise asymptotics: robust stochastic volatility models
• Regularity properties of some stochastic Volterra integrals with singular kernel
• Representation formulae for the fractional Brownian motion
• SMALL-TIME ASYMPTOTICS FOR IMPLIED VOLATILITY UNDER THE HESTON MODEL
• Sample path large deviations and optimal importance sampling for stochastic volatility models
• Sample path properties of Volterra processes
• Short-time near-the-money skew in rough fractional volatility models
• Some Problems Concerning Stability under Small Random Perturbations
• Stochastic analysis of Gaussian processes via Fredholm representation
• Variational Methods

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
• Local volatility under rough volatility
• 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
• Moment explosions in stochastic volatility models

This page was built for publication: Gaussian stochastic volatility models: scaling regimes, large deviations, and moment explosions

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2175333)