Large-time asymptotics for an uncorrelated stochastic volatility model

Martin Forde

We derive a large-time large deviation principle for the log stock price under an uncorrelated stochastic volatility model. For this we use a Donsker-Varadhan-type large deviation principle for the occupation measure of the Ornstein-Uhlenbeck process, combined with a simple application of the contraction principle and exponential tightness.

Mots clés: Stochastic volatility; Donsker-Varadhan large deviations for occupation measures; Large time implied volatility asymptotics

Domaines: Bio-informatique [q-bio.QM]; Bio-Informatique, Biologie Systémique [q-bio.QM]

Martin Forde. Large-time asymptotics for an uncorrelated stochastic volatility model. Statistics and Probability Letters, 2011, 81 (8), pp.1230. ⟨10.1016/j.spl.2011.03.021⟩. ⟨hal-00753944⟩