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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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VOLATILITY SMILE BY MULTILEVEL LEAST SQUARE
International Journal of Theoretical and Applied Finance, 2002The 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
Achdou, Yves, Pironneau, Olivier
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Stochastic Volatility Models: Faking a Smile
Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning, 2020Stochastic volatility models of option prices treat variance as a variable. However, the application of such models requires calibration to market prices that often treats variance as an optimized parameter.
D. Diavatopoulos, Oleg Sokolinskiy
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VOLATILITY SMILE INTERPOLATION WITH RADIAL BASIS FUNCTIONS
International Journal of Theoretical and Applied Finance, 2022The 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 +2 more
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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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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, Julien Guyon
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Whose sentiment explains implied volatility change and smile?
Finance Research Letters, 2023Doojin Ryu, D. Ryu, Heejin Yang
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A volatility smile-based uncertainty index
Annals of Finance, 2021J. Vicente, Jaqueline T. M. Marins
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The collocating local volatility framework – a fresh look at efficient pricing with smile
International Journal of Computational Mathematics, 2019It is a market practice to price exotic derivatives, like callable basket options, with the local volatility model [B. Dupire, Pricing with a smile, Risk 7 (1994), pp. 18–20; E. Derman and I.
L. Grzelak
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On Smile Properties of Volatility Derivatives: Understanding the VIX Skew
SIAM Journal on Financial Mathematics, 2022E. Alòs +2 more
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