Results 191 to 200 of about 15,207 (237)
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What determines volatility smile in China?
Economic Modelling, 2021Abstract The implied volatility for 50 ETF options in China shows a significant smile pattern across different moneyness. Call and put options on 50 ETFs transacted from February 2015 to December 2018 are obtained. Regression and vector autoregression analyses are employed to investigate the structural relationship between the volatility smile and ...
Pengshi Li, Aichuan Xian, Yan Lin
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Smile‐implied hedging with volatility risk
Journal of Futures Markets, 2021AbstractOptions can be dynamically replicated using model‐free Greeks extracted from the volatility smile. However, smile‐implied delta and delta–gamma hedging do not achieve minimum variance in the presence of price–volatility correlation, and these strategies have shown poor performance relative to the Black–Scholes (BS) benchmark.
Pascal François, Lars Stentoft
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SSRN Electronic Journal, 2001
The paper assumes that the implied volatility of options with some given expiration is a quadratic function of the moneyness. The coefficients of this quadratic function (the smile) are time dependent and stochastic. The paper derives exposure parameters of the price of the option to the local change in each of the smile coefficients, and an ...
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The paper assumes that the implied volatility of options with some given expiration is a quadratic function of the moneyness. The coefficients of this quadratic function (the smile) are time dependent and stochastic. The paper derives exposure parameters of the price of the option to the local change in each of the smile coefficients, and an ...
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Stochastic volatility, smile & asymptotics
Applied Mathematical Finance, 1999We consider the pricing and hedging problem for options on stocks whose volatility is a random process. Traditional approaches, such as that of Hull and White, have been successful in accounting for the much observed smile curve, and the success of a large class of such models in this respect is guaranteed by a theorem of Renault and Touzi, for which ...
K. Ronnie Sircar, George C. Papanicolaou
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Keep on Smiling: Market Imbalance, Option Pricing, and the Volatility Smile
SSRN Electronic Journal, 2022This article argues that the volatility smile is real in the sense that volatility and price change are correlated through the degree of market imbalance.
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Normalizing volatility transforms and general parameterization of volatility smile
SSRN Electronic Journal, 2021We provide an alternative proof of monotonicity of normalizing volatility transforms (NVTs) due to Fukasawa (2012), and then obtain a general formula for volatility surface for which the NVTs are increasing. This is used to obtain several results related to butterfly arbitrage and asymptotic behavior of implied volatility for large strikes.
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A Stochastic Volatility Model, Volatility Smile and Forecasting Volatility
SSRN Electronic Journal, 2004In this paper we propose a stochastic valuation model based on the Fourier transform for option price. This model can be used for the valuation of European options, characterized by two state variables: the price of the underlying asset and its volatility.
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Volatility Smile and One‐Month Foreign Currency Volatility Forecasts
Journal of Futures Markets, 2016We find knowledge of the volatility smile implied from foreign exchange options improves foreign exchange volatility forecast accuracy. The literature shows curvature of the smile can be captured by risk‐neutral skewness and risk‐neutral kurtosis and we find inclusion of these variables in forecast models improves volatility forecast accuracy. Further,
Alfred Huah‐Syn Wong +1 more
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VOLATILITY SMILE CONSISTENT OPTION MODELS: A SURVEY
International Journal of Theoretical and Applied Finance, 2001The developing literature on "smile consistent" no-arbitrage models has emerged from the need to price and hedge exotic options consistently with the prices of standard European options. This survey paper describes the steps through which this literature has evolved by providing a taxonomy of the various models. It highlights the main ideas behind the
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Investors' Heterogeneity and Implied Volatility Smiles
Management Science, 2012Heterogeneity in beliefs and time preferences among investors make stock volatility stochastic, even though the volatility of the underlying dividend is constant. Prices of the European options written on this stock admit closed-form solutions, hence their hedging deltas.
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