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Power law in Sandwiched Volterra Volatility model by Di Nunno, Giulia; Yurchenko-Tytarenko, Anton is a scholarly article available to read on EtoBox.

What is Power law in Sandwiched Volterra Volatility model about?

In this paper, we present analytical proof demonstrating that the Sandwiched Volterra Volatility (SVV) model is able to reproduce the power-law behavior of the at-the-money implied volatility skew, provided the correct choice of the Volterra kernel. To obtain this result, we assess the second-order Malliavin differentiability of the volatility process and investigate the conditions that lead to explosive behavior in the Malliavin derivative. As a supplementary result, we also prove a general Malliavin product rule.

Author

Di Nunno, Giulia; Yurchenko-Tytarenko, Anton

Published

2023

Language

EN