Mendes, Rui VilelaOliveira, Maria João2011-01-142011-01-142008Mendes, Rui Vilela; Oliveira, Maria João - A data-reconstructed fractional volatility model. "Economics [Em linha] : the open-access, open-assessment E-journal: discussion paper". ISSN 1864-6042. Nº 22 (2008), p. 1-201864-6042http://hdl.handle.net/10400.2/1711Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior are derived from the model and compared with data. Deviations from Black-Scholes and a new option pricing formula are also obtained.engFractional noiseInduced volatilityStatistics of returnsOption pricingjournal article