Deep calibration of the quadratic rough Heston model

Mathieu Rosenbaum; Jianfei Zhang

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arXiv · 2107.01611

Deep calibration of the quadratic rough Heston model

Mathieu Rosenbaum·Jianfei Zhang

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Abstract

The quadratic rough Heston model provides a natural way to encode Zumbach effect in the rough volatility paradigm. We apply multi-factor approximation and use deep learning methods to build an efficient calibration procedure for this model. We show that the model is able to reproduce very well both SPX and VIX implied volatilities. We typically obtain VIX option prices within the bid-ask spread and an excellent fit of the SPX at-the-money skew. Moreover, we also explain how to use the trained neural networks for hedging with instantaneous computation of hedging quantities.

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BibTeX RIS

Mathieu Rosenbaum, Jianfei Zhang. 2021-07-04. Deep calibration of the quadratic rough Heston model. https://arxiv.org/abs/2107.01611

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