The small and large time implied volatilities in the minimal market model

DOI10.1142/S0219024912500574zbMATH Open1260.91236arXiv1109.6154OpenAlexW3123145247MaRDI QIDQ4909142FDOQ4909142

Eckhard Platen, Zhijun Guo

Publication date: 12 March 2013

Published in: International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Abstract: This paper derives explicit formulas for both the small and large time limits of the implied volatility in the minimal market model. It is shown that interest rates do impact on the implied volatility in the long run even though they are negligible in the short time limit.

Full work available at URL: https://arxiv.org/abs/1109.6154

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zbMATH Keywords

square-root processbenchmark approachminimal market modelsmall and large time implied volatilities

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Auctions, bargaining, bidding and selling, and other market models (91B26)

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