We extend Donsker's approximation of Brownian motion to fractional Brownian motion with Hurst exponent H∈(0,1) and to Volterra-like processes. Some of the most relevant consequences of our ‘rough Donsker (rDonsker) Theorem' are convergence results for discrete approximations of a large class...

The rough Bergomi model introduced by Bayer, Friz and Gatheral has been outperforming conventional Markovian stochastic volatility models by reproducing implied volatility smiles in a very realistic manner, in particular for short maturities. We investigate here the dynamics of the VIX and the...

How can a government help secure low-cost equity financing? This study offers an answer that a government can secure sustainable economic progress when policies of economic freedom are well institutionalized in a way that results in low equity volatility, thus low-cost equity financing. This...

We lay out an empirical and a theoretical model to analyze the effects of non-fundamental exchange rate volatility on economic activity and welfare. In the first part of the paper, the GARCH-SVARmodel is applied to measure empirically the effect of the conditional exogenous exchange rate...