Results 221 to 230 of about 14,628 (253)

The Impact of Computational Error on the Volatility Smile [PDF]

SSRN Electronic Journal, 2013
It is well-known that the market prices of options produce implied volatilities that inexplicably vary by exercise price in a pattern often referred to as the volatility smile. This paper shows that not only do market prices produce volatility smiles, but so do model prices.
Weiping Li, Weiping Li, Jayaram Muthuswamy, Thomas A. Hanson, Don M. Chance   +4 more
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Stochastic volatility, smile & asymptotics

Applied Mathematical Finance, 1999
We 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 ...
George Papanicolaou, Ronnie Sircar
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Investors' Heterogeneity and Implied Volatility Smiles

Management Science, 2012
Heterogeneity 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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THE NORMALIZING TRANSFORMATION OF THE IMPLIED VOLATILITY SMILE [PDF]

Mathematical Finance, 2011
We study specific nonlinear transformations of the Black–Scholes implied volatility to show remarkable properties of the volatility surface. No arbitrage bounds on the implied volatility skew are given. Pricing formulas for European payoffs are given in terms of the implied volatility smile.
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VOLATILITY SMILE BY MULTILEVEL LEAST SQUARE

International Journal of Theoretical and Applied Finance, 2002
The aim of this paper is to propose several algorithms for finding the local volatility from partial observations of the price of an European vanilla option. Dupire's equation is used. The local volatility and the price of the option are discretized by finite elements with highly non uniform meshes and with a coarser mesh for the local volatility. The
Yves Achdou, Olivier Pironneau
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Option Valuation and the Volatility Smile

2009
In this chapter, we briefly present the basic concepts of option pricing theory. The readers who are familiar with these topics, can skip this chapter and begin with the next chapter directly. A Brownian motion is an elemental building-block in modeling the dynamics of stock returns, and correspondingly the geometric Brownian motion as an exponential ...
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The Slope of the Smile, and the Comovement of Volatility and Returns

SSRN Electronic Journal, 2009
The slope of the implied volatility smile reflects the correlation between volatility shocks and returns. By defining the slope as the difference between two implied variances, the relationship between the slope, and the correlation between volatility and returns can be derived formally in a way that is essentially model free.
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Finite arbitrage times and the volatility smile?

Physica A: Statistical Mechanics and its Applications, 2001
Abstract Extending previous work on non-equilibrium option pricing theory (Eur. Phys. J. 14 (2000) 383–394), a mean field approach is developed to understand the curvature of (implied by Black–Scholes (BS)) volatility surfaces (curves) as a function of moneyness (strike price divided by price).
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Catastrophe Risk and the Implied Volatility Smile

Journal of Risk and Insurance, 2018
AbstractProperty–casualty insurers are exposed to rare but severe natural disasters. This article analyzes the relation between catastrophe risk and the implied volatility smile of insurance stock options. We find that the slope is significantly steeper compared to the rest of the economy and exhibits a seasonal pattern due to hurricanes.
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Which uncertainty is powerful to forecast crude oil market volatility? New evidence

International Journal of Finance and Economics, 2022
Xiafei Li, Yu Wei, Xiaodan Chen
exaly