Asymptotic formulae for implied volatility in the Heston model

DOI10.1098/rspa.2009.0610zbMath1211.91253arXiv0911.2992OpenAlexW1974832466MaRDI QIDQ2997309

Antoine Jacquier, Martin Forde, Aleksandar Mijatović

Publication date: 6 May 2011

Published in: Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/0911.2992

zbMATH Keywords

asymptoticsimplied volatilityclosed-form formulasaddlepoint expansionsheston model

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70) Stochastic models in economics (91B70) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Related Items

Large deviations for the extended Heston model: the large-time case ⋮ Convergence of Heston to SVI ⋮ On refined volatility smile expansion in the Heston model ⋮ THE TERM STRUCTURE OF IMPLIED VOLATILITY IN SYMMETRIC MODELS WITH APPLICATIONS TO HESTON ⋮ Asymptotic Behavior of the Fractional Heston Model ⋮ Second Order Expansion for Implied Volatility in Two Factor Local Stochastic Volatility Models and Applications to the Dynamic $$\lambda $$-Sabr Model ⋮ The Gärtner-Ellis Theorem, Homogenization, and Affine Processes ⋮ A unified option pricing model with Markov regime-switching double stochastic volatility, stochastic interest rate and jumps ⋮ Option valuation under double exponential jump with stochastic intensity, stochastic interest rates and Markov regime-switching stochastic volatility ⋮ The Heston Riemannian distance function ⋮ The large-maturity smile for the Stein-Stein model ⋮ The large-maturity smile for the Heston model ⋮ Low-bias simulation scheme for the Heston model by Inverse Gaussian approximation ⋮ THE SMALL AND LARGE TIME IMPLIED VOLATILITIES IN THE MINIMAL MARKET MODEL ⋮ Heston model: the variance swap calibration ⋮ THE LARGE-MATURITY SMILE FOR THE SABR AND CEV-HESTON MODELS ⋮ Large deviations and stochastic volatility with jumps: asymptotic implied volatility for affine models ⋮ ASYMPTOTICS FOR EXPONENTIAL LÉVY PROCESSES AND THEIR VOLATILITY SMILE: SURVEY AND NEW RESULTS ⋮ The Randomized Heston Model ⋮ A neural network-based framework for financial model calibration ⋮ Large-maturity regimes of the Heston forward smile ⋮ MONOTONICITY OF PRICES IN HESTON MODEL ⋮ Small-time asymptotics for Gaussian self-similar stochastic volatility models ⋮ Asymptotics of Forward Implied Volatility

Cites Work

• Saddlepoint approximations for continuous-time Markov processes
• Saddlepoint approximations to option prices
• Analytical methods for hedging systematic credit risk with linear factor portfolios
• Can the implied volatility surface move by parallel shifts?
• Computing the implied volatility in stochastic volatility models
• Asymptotics of Implied Volatility far from Maturity
• REGULAR VARIATION AND SMILE ASYMPTOTICS
• Saddlepoint methods for option pricing
• SMALL-TIME ASYMPTOTICS FOR IMPLIED VOLATILITY UNDER THE HESTON MODEL
• THE MOMENT FORMULA FOR IMPLIED VOLATILITY AT EXTREME STRIKES
• Smile Asymptotics II: Models with Known Moment Generating Functions