2020/12/20 by Bastien Baldacci, Baldacci, Bastien
Economics, Econometrics and Finance · Mathematics · #Stochastic processes and financial applications #Financial Risk and Volatility Modeling #Point processes and geometric inequalities
paper · pdf · doi:10.48550/arxiv.2012.10875
We present a Hawkes modeling of the volatility surface's high-frequency dynamics and show how the Hawkes kernel coefficients govern the surface's skew and convexity. We provide simple sufficient conditions on the coefficients to ensure no-arbitrage opportunities of the surface. Moreover, these conditions reduce the number of the kernel's parameters to estimate. Finally, we show that at the macroscopic level, the surface is driven by a sum of risk factors whose volatility processes are rough.