FORDE, MARTIN; JACQUIER, ANTOINE - In: International Journal of Theoretical and Applied … 12 (2009) 06, pp. 861-876
We rigorize the work of Lewis (2007) and Durrleman (2005) on the small-time asymptotic behavior of the implied volatility under the Heston stochastic volatility model (Theorem 2.1). We apply the Gärtner-Ellis theorem from large deviations theory to the exponential affine closed-form expression...