This article studies the impact of long memory on volatility modelling and option pricing. We propose a general discrete-time pricing framework based on affine multi-component volatility models that admit ARCH(ccc) representations. This not only nests a large variety of option pricing models...

This article presents a quadratic hedging framework for a general class of discrete-time affine multi-factor models and investigates the extent to which multi-component volatility factors, fat tails, and a non-monotonic pricing kernel can improve the hedging performance. A semi-explicit hedging...