Implied Volatility from Local Volatility: A Path Integral Approach

DOI10.1007/978-3-319-11605-1_9zbMATH Open1418.91547OpenAlexW2103460965MaRDI QIDQ4560334FDOQ4560334

Authors: Tai-Ho Wang, Jim Gatheral 

Publication date: 11 December 2018

Published in: Springer Proceedings in Mathematics & Statistics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/978-3-319-11605-1_9

Recommendations

• IMPLIED AND LOCAL VOLATILITIES UNDER STOCHASTIC VOLATILITY
• On approximation of implied volatility in local volatility models
• Asymptotics of implied volatility in local volatility models
• Implied volatility in strict local martingale models
• Explicit implied volatilities for multifactor local-stochastic volatility models
• Reduced-order models for the implied variance under local volatility
• Forward implied volatility expansion in time-dependent local volatility models
• A new well-posed algorithm to recover implied local volatility
• Local volatility in the Heston model: a Malliavin calculus approach
• A Remark on Gatheral’s ‘Most-Likely Path Approximation’ of Implied Volatility

zbMATH Keywords

implied volatilitypath integrallocal volatility modelmost likely pathheat kernels expansionsmall time asymptotic expansion

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Heat kernel (35K08) Financial applications of other theories (91G80) Measure (Gaussian, cylindrical, etc.) and integrals (Feynman, path, Fresnel, etc.) on manifolds (46T12)

Cites Work

• Stochastic analysis on manifolds
• Title not available (Why is that?)
• Title not available (Why is that?)
• Asymptotics of hitting probabilities for general one-dimensional pinned diffusions
• Asymptotics of implied volatility in local volatility models
• Asymptotics and calibration of local volatility models
• Asymptotic approximations to deterministic and stochastic volatility models
• Closed-form asymptotics and numerical approximations of 1D parabolic equations with applications to option pricing
• The heat-kernel most-likely-path approximation
• Arbitrage-free SVI volatility surfaces
• Closed-form approximations for diffusion densities: A path integral approach.
• The path integral approach to financial modeling and options pricing

Cited In (8)

• On the Skew and Curvature of the Implied and Local Volatilities
• Forward implied volatility expansion in time-dependent local volatility models
• A Remark on Gatheral’s ‘Most-Likely Path Approximation’ of Implied Volatility
• Bridge representation and modal-path approximation
• Bessel bridge representation for the heat kernel in hyperbolic space
• The heat-kernel most-likely-path approximation
• Most-likely-path in Asian option pricing under local volatility models
• A new algorithm for computing path integrals and weak approximation of SDEs inspired by large deviations and Malliavin calculus

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