2025/05/13 by Jacquier, Antoine, Orioles, Adriano Oliveri, Zuric, Zan
#60G15 #60G22 #60H07 #91G20 #FOS: Economics and business #FOS: Mathematics #Pricing of Securities (q-fin.PR) #Probability (math.PR)
paper · doi:10.48550/arxiv.2505.08623
We propose a tractable extension of the rough Bergomi model, replacing the fractional Brownian motion with a generalised grey Brownian motion, which we show to be reminiscent of models with stochastic volatility of volatility. This extension breaks away from the log-Normal assumption of rough Bergomi, thereby making it a viable suggestion for the Equity Holy Grail -- the joint SPX/VIX options calibration. For this new (class of) model(s), we provide semi-closed and asymptotic formulae for SPX and VIX options and show numerically its potential advantages as well as calibration results.