Hagan, Patrick; Woodward, Diana - In: Applied Mathematical Finance 6 (1999) 3, pp. 147-157
measure. By using singular perturbation techniques, we obtain explicit algebraic formulas for the implied volatility σB in … put can then be calculated simply by substituting this implied volatility into Black's formula. For example, for a power … - β)2/24 a2tex/faυ2-2β +…} where faυ = ½(F0 + K). Our formula for the implied volatility is not exact. However, we show …