On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility (Q2463722)

The main goal of this paper is to provide a method based on the techniques of Malliavin calculus to estimate the rate of the short-dated behavior of the implied volatility for general jump-diffusion stochastic volatility models, where the volatility does not need to be a diffusion or a Markov process. Since the future volatility is not adapted, Malliavin calculus becomes a natural tool to analyze this problem. The basic tool is an anticipating Itô's formula for the Skorokhod integral. An extended \textit{J. Hull} and \textit{A. White} [J. Finance, 42, 281--300 (1987)] formula for a general class of jump-diffusion models with stochastic volatility is obtained. An expression for the derivative of the implied volatility is given. Some examples are presented that demonstrate the possibilities of this new method.