Economics: The Open-Access, Open Assessment E-Journal http://www.economics-ejournal.org en Rui Vilela Mendes Maria J. Oliveira A Data-Reconstructed Fractional Volatility Model 2008-05-13 Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior are derived from the model and compared with data. Deviations from Black-Scholes and a new option pricing formula are also obtained. http://www.economics-ejournal.org/economics/discussionpapers/2008-22 JEL C51 JEL G12 JEL G14