Diamonds and forward variance models

TL;DR

This paper introduces diamond trees and forests as computational tools for stochastic volatility models, especially rough volatility models in forward variance form, providing a non-technical overview of their application.

Contribution

It presents a novel application of diamond trees and forests to improve computation in forward variance stochastic volatility models, emphasizing rough volatility.

Findings

Enhanced computational methods for rough volatility models

Application of diamond structures to stochastic volatility

Simplified approach for forward variance models

Abstract

In this non-technical introduction to diamond trees and forests, we focus on their application to computation in stochastic volatility models written in forward variance form, rough volatility models in particular.