The Fractional Volatility Model: An Agent-Based Interpretation

Physica A 387 (2008) 3987–3994

9 Pages Posted: 27 Jan 2015

See all articles by Rui Vilela Mendes

Rui Vilela Mendes

CMAF, Complexo Interdisciplinar UL and IPFN, Instituto Superior Técnico

Date Written: January 25, 2015

Abstract

Based on the criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data. Here, some features of the model are reviewed and extended to account for leverage effects. Using agent-based models, one tries to find which agent strategies and (or) properties of the financial institutions might be responsible for the features of the fractional volatility model.

Suggested Citation

Mendes, Rui Vilela, The Fractional Volatility Model: An Agent-Based Interpretation (January 25, 2015). Physica A 387 (2008) 3987–3994, Available at SSRN: https://ssrn.com/abstract=2555196

Rui Vilela Mendes (Contact Author)

CMAF, Complexo Interdisciplinar UL and IPFN, Instituto Superior Técnico ( email )

Av. Rovisco Pais
Lisboa, 1049-001
Portugal

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