The fractional volatility model: An agent-based interpretation

preprint2007arXivOpen access

Abstract

Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data. Here, some features of the model are discussed and, using agent-based models, one tries to find which agent strategies and (or) properties of the financial institutions might be responsible for the features of the fractional volatility model.

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