A realistic modelling of the dynamics of equity volatility
By Hervé Andrès and Alexandre Boumezoued
14 January 2022
Although real-world modelling has many applications in the insurance industry, some existing models remain quite limited in their ability to replicate historical dynamics and properties. In this white paper, we discuss the use of the fractional Brownian motion, a new approach proposed by Gatheral et al in a 2018 paper. We note how the approach of looking at volatility in this way is highly consistent with historical data of equity stocks over time.
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