Results 231 to 240 of about 237,321 (276)

VOLATILITY SMILE INTERPOLATION WITH RADIAL BASIS FUNCTIONS

International Journal of Theoretical and Applied Finance, 2022
The Radial Basis Functions (RBF) interpolation is a popular approximation technique used to smooth scattered data in various dimensions. This study uses RBF interpolation to interpolate the volatility skew of the S&P500 index options. The interpolated skews are used to construct the risk-neutral densities of the index and its local volatility ...
HERMANN AZEMTSA DONFACK, CELESTIN WAFO SOH, ANTONIE KOTZE   +2 more
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The Smile in Stochastic Volatility Models

SSRN Electronic Journal, 2011
We 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, Julien Guyon
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Smiling for the Delayed Volatility Swap

SSRN Electronic Journal, 2011
Using change of time method, we derive a closed-form formula for the volatility swap in an adjusted version of the Heston model with stochastic volatility with delay. The numerical result is presented for underlying EURUSD on September 30th 2011. The novelty of the paper is two-fold: application of change of time method to the delayed Heston model and ...
Anatoliy V. Swishchuk, Nelson Vadori
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A Stochastic Volatility Model, Volatility Smile and Forecasting Volatility

SSRN Electronic Journal, 2004
In 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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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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Normalizing volatility transforms and general parameterization of volatility smile

SSRN Electronic Journal, 2021
We 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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Quadratic Volatility Smiles

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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Quanto Implied Volatility Smile

SSRN Electronic Journal, 2014
We 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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Smile Dynamics and Rough Volatility

<div> We analyze joint spot-smile dynamics, focusing on the Skew Stickiness Ratio in rough volatility models, and compare the results with SPX data. After calibration to the SPX implied volatility term structure, rough models yield SSRs similar to those of classical forward variance curve models, suggesting that rough volatility alone does not ...
Florian Bourgey, Stefano De Marco, Jules Delemotte   +2 more
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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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