Pricing Under Rough Volatility

@article{Bayer2015PricingUR,
  title={Pricing Under Rough Volatility},
  author={Christian Bayer and Peter K. Friz and Jim Gatheral},
  journal={ERN: Other Econometric Modeling: Derivatives (Topic)},
  year={2015}
}
From an analysis of the time series of volatility using recent high frequency data, Gatheral, Jaisson and Rosenbaum previously showed that log-volatility behaves essentially as a fractional Brownian motion with Hurst exponent H of order 0.1, at any reasonable time scale. The resulting Rough Fractional Stochastic Volatility (RFSV) model is remarkably consistent with financial time series data. We now show how the RFSV model can be used to price claims on both the underlying and integrated… 
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