We derive a closed-form asymptotic expansion formula for option implied volatility under a two-factor jump-diffusion stochastic volatility model when time-to-maturity is small. Based on numerical experiments we describe the range of time-to-maturity and moneyness for which the approximation is...

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...