Results 211 to 220 of about 14,628 (253)
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A bias in the volatility smile
Review of Derivatives Research, 2016We show that even if options traded with Black–Scholes–Merton pricing under a known and constant volatility, meaning essentially in perfect markets, one would still obtain smiles, skews, and smirks. We detect this problem by pricing options with a known volatility and reverse engineering to back into the implied volatility from the model price that was
Weiping Li +4 more
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Smile-Implied Hedging with Volatility Risk
SSRN Electronic Journal, 2020AbstractOptions 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 +3 more
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The Smile in Stochastic Volatility Models
SSRN Electronic Journal, 2011We consider general stochastic volatility models with no local volatility component and derive the general expression of the volatility smile at order two in volatility-of-volatility. We show how, at this order, the smile only depends on three dimensionless numbers whose precise expressions as functionals of the model's spot/variance and variance ...
Lorenzo Bergomi +3 more
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Volatility smiles and the information content of news
Applied Financial Economics, 2001The paper investigates whether the impact of selected news - scheduled and un-scheduled - affects only the current conditional variance of financial prices or, by bringing new information to the market, induces also a revision of the implied variance, i.e. the variance expected to prevail over the life to maturity of an option.
MELE, Antonio, FORNARI F.
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Quanto Implied Volatility Smile
SSRN Electronic Journal, 2014We propose a numerical procedure, addressed as copula integration method, to calculate quanto implied volatility adjustments. The method consists in a direct integration of the quanto vanilla payoff, using the bivariate terminal probability distribution of the asset and the relevant foreign exchange rate. The bivariate terminal distribution is obtained
Alessandro Cesarini, Stefano Giovannitti
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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 ...
Yan Lin, Pengshi Li, Aichuan Xian
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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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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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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 ...
openaire +2 more sources