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The fractional volatility model: An agent-based interpretation

Authors
Journal
Physica A Statistical Mechanics and its Applications
0378-4371
Publisher
Elsevier
Publication Date
Volume
387
Issue
15
Identifiers
DOI: 10.1016/j.physa.2008.01.052
Keywords
  • Fractional Volatility
  • Agent-Based Models
Disciplines
  • Mathematics

Abstract

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.

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