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Develop and assess a computationally tractable Volterra–Hawkes stochastic-volatility model with a regularized fractional kernel for pricing American options with rough volatility and jump clustering.

August 16, 2026MathematicsOpen Access

A Volterra–Hawkes Model for American Option Pricing Under a Regularized Fractional Kernel

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Authors

YZYizhe ZhangGuangdong University of Technology MLMuxin LiGuangdong University of Technology HLHoude LiangGuangdong University of Technology

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Implication

Quantitative modeling study demonstrates improved American option pricing accuracy across equity stocks using a dual-channel Volterra–Hawkes framework, indicating complementary jump dynamics.

Key Points

Develop and assess a computationally tractable Volterra–Hawkes stochastic-volatility model with a regularized fractional kernel for pricing American options with rough volatility and jump clustering.
Designed a regularized fractional kernel with an exponential-sum approximation to construct a finite-dimensional Ornstein–Uhlenbeck Markovian lift with corrected covariance simulation.
Implemented least-squares Monte Carlo valuation across a two-branch ablation design comparing rough-Heston diffusion against price-jump and variance-jump Hawkes channels.
Calibrated and evaluated models out of sample on short-maturity American put options across five underlying equities: NVDA, TSLA, META, AAPL, and MSFT.
The full dual-channel Volterra–Hawkes model attained the lowest per-date vega-weighted RMSE on 77.8% of out-of-sample dates across pooled assets.
The full model achieved the lowest pooled error on four out of five evaluated underlying equities, with META being the only exception.

Cite This Study

Zhang et al. (2026) studied this question.

synapsesocial.com/papers/6a817a60f2fb91fc834ae1aa https://doi.org/10.3390/math14162952

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Implication

Quantitative modeling study demonstrates improved American option pricing accuracy across equity stocks using a dual-channel Volterra–Hawkes framework, indicating complementary jump dynamics.

A Volterra–Hawkes Model for American Option Pricing Under a Regularized Fractional Kernel

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Implication

Key Points

Cite This Study

A Volterra–Hawkes Model for American Option Pricing Under a Regularized Fractional Kernel

Discussion

Member takes

Implication

Key Points

Cite This Study

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