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Approximate Pricing of Derivatives Under Fractional Stochastic Volatility Model

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  • Yuecai Han
  • Xudong Zheng

Abstract

We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time and fractional Ornstein-Uhlenbeck process. Numerical simulations are given to illustrate the feasibility and operability of the approximation, and also demonstrate the effect of long-range on derivative prices.

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  • Yuecai Han & Xudong Zheng, 2022. "Approximate Pricing of Derivatives Under Fractional Stochastic Volatility Model," Papers 2210.15453, arXiv.org.
    • Handle: RePEc:arx:papers:2210.15453
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