Conference paper

Authors list: Alfeus, Mesias; Overbeck, Ludger; Schloegl, Erik

Publication year: 2019

Pages: 538-552

Journal: The Journal of Futures Markets

Volume number: 39

Issue number: 5

ISSN: 0270-7314

eISSN: 1096-9934

DOI Link: https://doi.org/10.1002/fut.21993

Conference: 5th Annual Derivatives Market Conference

Publisher: Wiley

Abstract: 
This model combines two important stylized features of volatility, the rough behavior consistent with a Hurst parameter less than 0.5, and the regime switching property consistent with more long-term economic considerations. It is nevertheless highly tractable in the sense of semianalytic formulae for European options, and permits a partial Monte Carlo method of similar computational speed as the semianalytic formula (at an appropriate number of Monte Carlo simulations). While option prices are relatively insensitive to the choice of Hurst parameter, introducing rough volatility allows for a better fit to the at-the-money skew.

Harvard Citation style: Alfeus, M., Overbeck, L. and Schloegl, E. (2019) Regime switching rough Heston model, The Journal of Futures Markets, 39(5), pp. 538-552. https://doi.org/10.1002/fut.21993

APA Citation style: Alfeus, M., Overbeck, L., & Schloegl, E. (2019). Regime switching rough Heston model. The Journal of Futures Markets. 39(5), 538-552. https://doi.org/10.1002/fut.21993