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Preprints, Working Papers, ... (Working Paper) Year : 2022

The Rough Path-Dependent Volatility Model


This paper introduces the rough path-dependent volatility (RPDV) model, which is structurally adapted to jointly capturing two major empirical features of volatility, namely its rough behavior and path-dependence. After presenting the model in its general form and its link with other existing models in the literature, we then present a Markovian multi-factor approximation of the RPDV model based on the work of Abi Jaber (2019). Finally, the paper focuses on a selection of RPDV model specifications that are interpretable from an economic point of view, leading to the formulation of different hypotheses about both asset price and volatility formation mechanisms.
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hal-04012310 , version 1 (02-03-2023)



Léo Parent. The Rough Path-Dependent Volatility Model. 2023. ⟨hal-04012310⟩
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