On VIX Futures in the rough Bergomi model

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Title: On VIX Futures in the rough Bergomi model
Authors: Jacquier, A
Aitor Muguruza, AM
Claude Martini, CM
Item Type: Journal Article
Abstract: The rough Bergomi model introduced by Bayer et al. [Quant. Finance, 2015, 1–18] has been outperforming conventional Markovian stochastic volatility models by reproducing implied volatility smiles in a very realistic manner, in particular for short maturities. We investigate here the dynamics of the VIX and the forward variance curve generated by this model, and develop efficient pricing algorithms for VIX futures and options. We further analyse the validity of the rough Bergomi model to jointly describe the VIX and the SPX, and present a joint calibration algorithm based on the hybrid scheme by Bennedsen et al. [Finance Stoch., forthcoming].
Issue Date: 25-Aug-2017
Date of Acceptance: 5-Jul-2017
URI: http://hdl.handle.net/10044/1/50070
DOI: https://dx.doi.org/10.1080/14697688.2017.1353127
ISSN: 1469-7696
Publisher: Taylor & Francis
Start Page: 45
End Page: 61
Journal / Book Title: Quantitative Finance
Volume: 18
Issue: 1
Copyright Statement: © 2017 Informa UK Limited, trading as Taylor & Francis Group. This is an Accepted Manuscript of an article published by Taylor & Francis Group in Quantitative Finance on 25 Aug 2017, available online at: http://www.tandfonline.com/10.1080/14697688.2017.1353127
Sponsor/Funder: Engineering & Physical Science Research Council (EPSRC)
Funder's Grant Number: EP/M008436/1
Keywords: 01 Mathematical Sciences
15 Commerce, Management, Tourism And Services
14 Economics
Finance
Publication Status: Published
Appears in Collections:Financial Mathematics
Mathematics
Faculty of Natural Sciences



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