Reconstructing volatility: Pricing of index options under rough volatility
Copyright policy )Reconstructing volatility: Pricing of index options under rough volatility
AbstractAvellaneda et al. (2002, 2003) pioneered the pricing and hedging of index options – products highly sensitive to implied volatility and correlation assumptions – with large deviations methods, assuming local volatility dynamics for all components of the index. We present an extension applicable to non‐Markovian dynamics and in particular the case of rough volatility dynamics.
- Weierstrass Institute Germany
- Technical University of Berlin Germany
- Leibniz Association Germany
- Weierstrass Institute for Applied Analysis and Stochastics Germany
ddc:510, 330, Probability (math.PR), article, 500 Naturwissenschaften und Mathematik::510 Mathematik::510 Mathematik, volatility, index options, ddc:519, 60F10 (Primary) 91G20 (Secondary), 510, FOS: Economics and business, Derivative securities (option pricing, hedging, etc.), correlation, pricing, FOS: Mathematics, Pricing of Securities (q-fin.PR), hedging, Quantitative Finance - Pricing of Securities, Mathematics - Probability
ddc:510, 330, Probability (math.PR), article, 500 Naturwissenschaften und Mathematik::510 Mathematik::510 Mathematik, volatility, index options, ddc:519, 60F10 (Primary) 91G20 (Secondary), 510, FOS: Economics and business, Derivative securities (option pricing, hedging, etc.), correlation, pricing, FOS: Mathematics, Pricing of Securities (q-fin.PR), hedging, Quantitative Finance - Pricing of Securities, Mathematics - Probability
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