Jeng, S.W.; Kilicman, A. Fractional Riccati Equation and Its Applications to Rough Heston Model Using Numerical Methods. Symmetry2020, 12, 959.
Jeng, S.W.; Kilicman, A. Fractional Riccati Equation and Its Applications to Rough Heston Model Using Numerical Methods. Symmetry 2020, 12, 959.
Jeng, S.W.; Kilicman, A. Fractional Riccati Equation and Its Applications to Rough Heston Model Using Numerical Methods. Symmetry2020, 12, 959.
Jeng, S.W.; Kilicman, A. Fractional Riccati Equation and Its Applications to Rough Heston Model Using Numerical Methods. Symmetry 2020, 12, 959.
Abstract
Rough volatility models are popularized by \cite{gatheral2018volatility}, where they have shown that the empirical volatility in the financial market is extremely consistent with rough volatility. Fractional Riccati equation as a part of computation for the characteristic function of rough Heston model is not known in explicit form as of now and therefore, we must rely on numerical methods to obtain a solution. In this paper, we give a short introduction to option pricing theory and an overview of the current advancements on the rough Heston model.
Keywords
Fractional Riccati equation; Rough volatility models; Heston model
Subject
Computer Science and Mathematics, Applied Mathematics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
