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No arbitrage global parametrization for the eSSVI volatility surface

Mingone, Arianna - 2022

The article describes a global and arbitrage-free parametrization of the eSSVI surfaces introduced by Hendriks and … suggested in this article is faster and always guarantees an arbitrage-free fit of market data …

Persistent link: https://www.econbiz.de/10013292792

The Small-Maturity Heston Forward Smile

Jacquier, Antoine (Jack) - 2015

In this paper we investigate the asymptotics of forward-start options and the forward implied volatility smile in the Heston model as the maturity approaches zero. We prove that the forward smile for out-of-the-money options explodes and compute a closed-form high-order expansion detailing the...

Persistent link: https://www.econbiz.de/10013035837

Asymptotics of Forward Implied Volatility

Jacquier, Antoine (Jack) - 2015

We prove here a general closed-form expansion formula for forward-start options and the forward implied volatility smile in a large class of models, including the Heston stochastic volatility and time-changed exponential Levy models.This expansion applies to both small and large maturities and...

Persistent link: https://www.econbiz.de/10013036196

Enhanced Valuation of European Options Under Jump Processes and Innovative Characterization of Implied Volatility Smile

Dubrana, Ludovic - 2011

An enhanced option pricing framework that makes use of both continuous and discontinuous time paths based on a geometric Brownian motion and Poisson-driven jump processes respectively is performed in order to better fit with real-observed stock price paths while maintaining the analytical...

Persistent link: https://www.econbiz.de/10013118115

Performance Measurement for Option Portfolios in a Stochastic Volatility Framework

Baule, Rainer - 2019

Measuring the performance of stock portfolios that include options is challenging due to options' nonlinearity in the underlying, their exposure to volatility risk, and their time decay. Our contribution to the literature is twofold: First, we provide a theoretically rigorous derivation of the...

Persistent link: https://www.econbiz.de/10012900121

Asymptotics for Exponential Levy Processes and Their Volatility Smile : Survey and New Results

Andersen, Leif B. G. - 2012

Exponential Lévy processes can be used to model the evolution of various financial variables such as FX rates, stock prices, etc. Considerable efforts have been devoted to pricing derivatives written on underliers governed by such processes, and the corresponding implied volatility surfaces...

Persistent link: https://www.econbiz.de/10013104402

Inference, arbitrage, and asset price volatility

Adrian, Tobias (contributor) - 2004 - [Elektronische Ressource], Rev. February 2008

, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy … assets in response to temporary price declines (the arbitrage effect) but sell when prices decline permanently (the inference … effect). In equilibrium, the presence of arbitrageurs increases volatility when the inference effect dominates the arbitrage …

Persistent link: https://www.econbiz.de/10002101431

Inference, arbitrage, and asset price volatility

Adrian, Tobias - In: Journal of financial intermediation 18 (2009) 1, pp. 49-64

Persistent link: https://www.econbiz.de/10003813178

A Test of Speculative Arbitrage : Is the Cross-section of Volatility Invariant?

Barardehi, Yashar H. - 2019

trade-time volatilities. We jointly develop theoretical foundations of "no speculative arbitrage'' whose implications … month windows. We find strong support for no speculative arbitrage at a moment in time, but not across time …

Persistent link: https://www.econbiz.de/10012901721

Arbitrage free approximations to candidate volatility surface quotations

Madan, Dilip B.; Schoutens, Wim - In: Journal of risk and financial management : JRFM 12 (2019) 2/69, pp. 1-21

It is argued that the growth in the breadth of option strikes traded after the financial crisis of 2008 poses difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain approximations are proposed as an alternative. They are shown...

Persistent link: https://www.econbiz.de/10012022144