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Short-time at-the-money skew and rough fractional volatility

Short-time at-the-money skew and rough fractional volatility

The Black–Scholes implied volatility skew at the money of SPX options is known to obey a power law with respect to the time to maturity. We construct a model of the underlying asset price process which is dynamically consistent to the power law. The volatility process of the model is …