Correlated Log-Normal Random Variables under a Multiscale Volatility Model

The study focuses on extending the fast mean-reversion volatility, which was developed by the author in a previous work, to the multiscale volatility model so that it can express a well-separated time scale. The leading-order term and first-order correction terms are analytically computed using the perturbation theory based on the Lie–Trotter operator splitting method. Finally, the study is concluded by deriving the numerical results that further validate the effectiveness of the model.

Abstract licence: CC BY

A person counts once a day per paper. We keep no cookie and no address: a reader is a hash that changes every day. Any month under five reads shows no number.