Risk premium and rough volatility
arxiv(2024)
摘要
One the one hand, rough volatility has been shown to provide a consistent
framework to capture the properties of stock price dynamics both under the
historical measure and for pricing purposes. On the other hand, market price of
volatility risk is a well-studied object in Financial Economics, and empirical
estimates show it to be stochastic rather than deterministic. Starting from a
rough volatility model under the historical measure, we take up this challenge
and provide an analysis of the impact of such a non-deterministic risk for
pricing purposes.
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