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arXiv · 2210.15343

Change of measure in a Heston-Hawkes stochastic volatility model

David R. Baños·Salvador Ortiz-Latorre·Oriol Zamora Font
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Abstract

We consider the stochastic volatility model obtained by adding a compound Hawkes process to the volatility of the well-known Heston model. A Hawkes process is a self-exciting counting process with many applications in mathematical finance, insurance, epidemiology, seismology and other fields. We prove a general result on the existence of a family of equivalent (local) martingale measures. We apply this result to a particular example where the sizes of the jumps are exponentially distributed.

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David R. Baños, Salvador Ortiz-Latorre, Oriol Zamora Font. 2022-10-27. Change of measure in a Heston-Hawkes stochastic volatility model. https://arxiv.org/abs/2210.15343

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