The fractional volatility model: An agent-based interpretation

Details The fractional volatility model: An agent-based interpretation The fractional volatility model: An agent-based interpretation

2007-06-26

arxiv.org/abs/0706.3827v2

Physica A: Statistical Mechanics and its Applications, 387 (2008) 3987-3994

Economy

Quantitative Finance

Statistical Finance

23 pages, 11 figures

Scientific paper

10.1016/j.physa.2008.01.052

Based on 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 discussed and, 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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