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Implied Volatility at Expiration

The main result of the paper is a formula for zero time-to-maturity limit of implied volatilities of European options under a broad class of stochastic volatility models. Based on this formula, we propose a closed-form approximation of the implied volatility smile. Numerical examples suggest that our approximation is accurate in the absence of mean-reversion in stochastic volatility.
Year of publication:
2004-11
Authors: Medvedev, Alexey
Subject: Option pricing | stochastic volatility | implied volatility | short-maturity asymptotics
Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Notes:
Number 08-04 26 pages
Classification: G12 - Asset Pricing
Source:
Persistent link: https://www.econbiz.de/10005534183
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