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Small-time moderate deviations for the randomised Heston model

Part of: Mathematical economics Limit theorems Mathematical finance

Published online by Cambridge University Press:  04 May 2020

Antoine Jacquier  and
Fangwei Shi
Antoine Jacquier*
Affiliation:
Imperial College London and Alan Turing Institute
Fangwei Shi*
Affiliation:
Imperial College London
*
*Postal address: Department of Mathematics and Alan Turing Institute, Imperial College London, London SW7 2AZ, UK.
*Postal address: Department of Mathematics and Alan Turing Institute, Imperial College London, London SW7 2AZ, UK.
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Abstract

We extend previous large deviations results for the randomised Heston model to the case of moderate deviations. The proofs involve the Gärtner–Ellis theorem and sharp large deviations tools.

Keywords

Stochastic volatilitymoderate deviationsHeston modelimplied volatilityasymptotic expansion

MSC classification

Primary: 60F10: Large deviations
Secondary: 91G20: Derivative securities 91B70: Stochastic models
Type
Research Papers
Information
Journal of Applied Probability , Volume 57 , Issue 1 , March 2020 , pp. 19 - 28
Copyright
© Applied Probability Trust 2020

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