Sequential Monte Carlo for fractional stochastic volatility models

DOI10.1080/14697688.2017.1327717MaRDI QIDQ4554435zbMATH OpenOpenAlexFDO

Authors Alexandra Chronopoulou, Konstantinos Spiliopoulos

Publication date 14 November 2018

Published in Quantitative Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1508.02651

zbMATH Keywords

parameter estimationparticle filteringlong memory stochastic volatilityrough stochastic volatility

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Numerical methods (including Monte Carlo methods) (91G60)

Abstract: In this paper we consider a fractional stochastic volatility model, that is a model in which the volatility may exhibit a long-range dependent or a rough/antipersistent behavior. We propose a dynamic sequential Monte Carlo methodology that is applicable to both long memory and antipersistent processes in order to estimate the volatility as well as the unknown parameters of the model. We establish a central limit theorem for the state and parameter filters and we study asymptotic properties (consistency and asymptotic normality) for the filter. We illustrate our results with a simulation study and we apply our method to estimating the volatility and the parameters of a long-range dependent model for S&P 500 data.

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Cited in

(2)

• Numerical analysis of fractional order Black-Scholes option pricing model with band equation method
• Delta-hedging in fractional volatility models

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Uses Software

• longmemo

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