We revisit the so-called Bergomi-Guyon expansion (Bergomi and Guyon, Stochastic volatility's orderly smiles, Risk, May … 2012). The expansion provides the smile of implied volatility at second order in the volatility of volatility for general … stochastic volatility models, including variance curve models. First, we present a new derivation of the price expansion which …

behavior of the implied volatility surface. These rules are the sticky delta rule and the sticky strike rule. I present a new … specification to test the sticky strike rule, which allows for dynamics in the implied volatility surface. In the empirical … application I use monthly implied volatility surfaces corresponding to the IBEX 35 index. The estimation results show that the …

find that the volatility depends on either the interest rate level or information shocks but not on both. Finally, we … propose to describe the short term interest rate's dynamics by means of an AR(1) model with stochastic volatility. -- Term … Structure Models ; Stochastic Volatility ; ARCH …