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arXiv · 1405.6514

Convergence in Multiscale Financial Models with Non-Gaussian Stochastic Volatility

Martino Bardi·Annalisa Cesaroni·Andrea Scotti
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Abstract

We consider stochastic control systems affected by a fast mean reverting volatility $Y(t)$ driven by a pure jump Lévy process. Motivated by a large literature on financial models, we assume that $Y(t)$ evolves at a faster time scale $\frac{t}{\varepsilon}$ than the assets, and we study the asymptotics as $\varepsilon\to 0$. This is a singular perturbation problem that we study mostly by PDE methods within the theory of viscosity solutions.

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BibTeXRIS

Martino Bardi, Annalisa Cesaroni, Andrea Scotti. 2014-05-26. Convergence in Multiscale Financial Models with Non-Gaussian Stochastic Volatility. https://arxiv.org/abs/1405.6514

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