From Hyper Roughness to Jumps as $H\to -1/2$

Abstract

We investigate the weak limit of the hyper-rough square-root process as the Hurst index $H$ goes to $-1/2$. This limit corresponds to the fractional kernel $t^{H-1/2}$ losing integrability. We establish the joint convergence of the couple $(X,M)$, where $X$ is the hyper-rough process and $M$ the associated martingale, to a fully correlated Inverse Gaussian Lévy jump process. This unveils the existence of a continuum between hyper-rough continuous models and jump processes, as a function of the Hurst index. Since we prove a convergence of continuous to discontinuous processes, the usual Skorokhod $J_1$ topology is not suitable for our problem. Instead, we obtain the weak convergence in the Skorokhod $M_1$ topology for $X$ and in the non-Skorokhod $S$ topology for $M$.