Asymptotics of implied volatility in local volatility models

DOI10.1111/J.1467-9965.2010.00472.XzbMATH Open1270.91093OpenAlexW2099993341MaRDI QIDQ4919611FDOQ4919611

Authors: Jim Gatheral, Elton P. Hsu, Peter Laurence, Cheng Ouyang, Tai-Ho Wang 

Publication date: 14 May 2013

Published in: Mathematical Finance (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1111/j.1467-9965.2010.00472.x

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zbMATH Keywords

asymptotic expansionlocal volatilityimplied volatilityheat kernels

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Numerical solutions to stochastic differential and integral equations (65C30)

Cites Work

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• Option pricing with quadratic volatility: a revisit

Cited In (88)

• Pricing step options under the CEV and other solvable diffusion models
• A volatility-of-volatility expansion of the option prices in the SABR stochastic volatility model
• Effective asymptotics analysis for finance
• The principle of not feeling the boundary for the SABR model
• Local stochastic volatility with jumps: analytical approximations
• Small-time expansions for local jump-diffusion models with infinite jump activity
• Asymptotic expansion for a Black-Scholes model with small noise stochastic jump-diffusion interest rate
• IMPLIED AND LOCAL VOLATILITIES UNDER STOCHASTIC VOLATILITY
• On the Skew and Curvature of the Implied and Local Volatilities
• Asymptotic expansion for some local volatility models arising in finance
• Asymptotic approximations for pricing derivatives under mean-reverting processes
• Pricing discrete barrier options under stochastic volatility
• Third-order short-time expansions for close-to-the-money option prices under the CGMY model
• Asymptotics of implied volatility to arbitrary order
• Option pricing in the moderate deviations regime
• A compact difference scheme for time-fractional Black-Scholes equation with time-dependent parameters under the CEV model: American options
• Forward implied volatility expansion in time-dependent local volatility models
• Marginal density expansions for diffusions and stochastic volatility. II: Applications
• Asymptotics of Implied Volatility far from Maturity
• Options on bonds: implied volatilities from affine short-rate dynamics
• Intrinsic expansions for averaged diffusion processes
• Recovery of local volatility for financial assets with mean-reverting price processes
• Computing the implied volatility in stochastic volatility models
• SHORT MATURITY ASIAN OPTIONS FOR THE CEV MODEL
• Small-time expansions of the distributions, densities, and option prices of stochastic volatility models with Lévy jumps
• Large-maturity regimes of the Heston forward smile
• Functional analytic (ir-)regularity properties of SABR-type processes
• Small-time asymptotics in geometric Asian options for a stochastic volatility jump-diffusion model
• Numerical investigation of the implied volatility for European call and put options on forwards on power with spikes in the framework of the non-Markovian approach
• A Yosida's parametrix approach to Varadhan's estimates for a degenerate diffusion under the weak Hörmander condition
• Short-time implied volatility in exponential Lévy models
• High-order short-time expansions for ATM option prices of exponential Lévy models
• Short-time at-the-money skew and rough fractional volatility
• Extreme at-the-money skew in a local volatility model
• Short-time asymptotic expansions of semilinear evolution equations
• Hermite polynomial based expansion of European option prices
• Asymptotics and calibration of local volatility models
• Asymptotics of Forward Implied Volatility
• PDE models for the pricing of a defaultable coupon-bearing bond under an extended JDCEV model
• Short Maturity Asian Options in Local Volatility Models
• Asymptotics for the discrete-time average of the geometric Brownian motion and Asian options
• Pricing and hedging vulnerable option with funding costs and collateral
• Short maturity forward start Asian options in local volatility models
• A PDE method for estimation of implied volatility
• Indifference prices and implied volatilities
• Second order expansion for implied volatility in two factor local stochastic volatility models and applications to the dynamic \(\lambda\)-SABR model
• Most-likely-path in Asian option pricing under local volatility models
• On error estimates for asymptotic expansions with Malliavin weights: application to stochastic volatility model
• Explicit density approximations for local volatility models using heat kernel expansions
• APPROXIMATING LOCAL VOLATILITY FUNCTIONS OF STOCHASTIC VOLATILITY MODELS: A CLOSED-FORM EXPANSION APPROACH
• Short maturity conditional Asian options in local volatility models
• Asymptotic expansion approach in finance
• Small-Time Asymptotics of Option Prices and First Absolute Moments
• Local Volatility, Conditioned Diffusions, and Varadhan's Formula
• Explicit implied volatilities for multifactor local-stochastic volatility models
• Implied volatility in strict local martingale models
• Approximate solutions to second-order parabolic equations: evolution systems and discretization
• Small-time asymptotics for Gaussian self-similar stochastic volatility models
• Static replication of barrier-type options via integral equations
• General smile asymptotics with bounded maturity
• General asymptotics of Wiener functionals and application to implied volatilities
• Asymptotics beats Monte Carlo: the case of correlated local vol baskets
• Asymptotics of the time-discretized log-normal SABR model: the implied volatility surface
• Note on an extension of an asymptotic expansion scheme
• Implied Volatility from Local Volatility: A Path Integral Approach
• Marginal density expansions for diffusions and stochastic volatility. I: Theoretical foundations
• Large deviations for non-Markovian diffusions and a path-dependent eikonal equation
• IMPLIED VOLATILITY IN THE HULL-WHITE MODEL
• Asymptotic expansion method for local volatility models
• Closed-form implied volatility surfaces for stochastic volatility models with jumps
• The exact smile of certain local volatility models
• On approximation of implied volatility in local volatility models
• Asymptotic implied volatility at the second order with application to the SABR model
• Small-time asymptotics under local-stochastic volatility with a jump-to-default: curvature and the heat kernel expansion
• Reduced-order models for the implied variance under local volatility
• Robust and accurate reconstruction of the time-dependent continuous volatility from option prices
• The small and large time implied volatilities in the minimal market model
• An improved asymptotics of implied volatility in the gatheral model
• A recursive method for static replication of autocallable structured products
• Local volatility under rough volatility
• Reconstructing volatility: Pricing of index options under rough volatility
• MARKOVIAN STOCHASTIC VOLATILITY WITH STOCHASTIC CORRELATION — JOINT CALIBRATION AND CONSISTENCY OF SPX/VIX SHORT-MATURITY SMILES
• Approximation formulas for short-maturity near-the-money implied volatilities in the Heston and SABR models
• Short-time expansions for call options on leveraged ETFs under exponential Lévy models with local volatility
• On Small Time Asymptotics for Rough Differential Equations Driven by Fractional Brownian Motions
• A new algorithm for computing path integrals and weak approximation of SDEs inspired by large deviations and Malliavin calculus
• Small-time asymptotics for the at-the-money implied volatility in a multi-dimensional local volatility model
• SHORT-MATURITY ASYMPTOTICS FOR OPTION PRICES WITH INTEREST RATE EFFECTS

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