Martingale expansion for stochastic volatility

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Authors: Masaaki Fukasawa
Cited by: 0

Abstract

The martingale expansion provides a refined approximation to the marginal distributions of martingales beyond the normal approximation implied by the martingale central limit theorem. We develop a martingale expansion framework specifically suited to continuous stochastic volatility models. Our approach accommodates both small volatility-of-volatility and fast mean-reversion models, yielding first-order perturbation expansions under essentially minimal conditions.

Fields of Study & Subjects

Stochastic processes and financial applications Financial Risk and Volatility Modeling Probability and Statistical Research

Publication details

Journal / source
arXiv (Cornell University)
Publication date
14 January 2026
Document type
Preprint