Computation of deterministic volatility surfaces
نویسندگان
چکیده
منابع مشابه
Computation of Deterministic Volatility Surfaces
The `volatility smile' is one of the well-known biases of Black-Scholes models for pricing options. In this paper, we introduce a robust method of reducing this bias by pricing subject to a deterministic functional volatility = (S; t). This instantaneous volatility is chosen as a spline whose weights are determined by a regularised numerical strategy that approximately minimises the di erence b...
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Abstract In this paper, we characterize two deterministic implied volatility models, defined by assuming that either the per-delta or the per-strike implied volatility surface has a deterministic evolution. Practitioners have recently proposed these two models to describe two regimes of implied volatility (see Derman (1999 Risk 4 55–9)). In an arbitrage-free sticky-delta model, we show that the...
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The prices of index options at a given date are usually represented via the corresponding implied volatility surface, presenting skew/smile features and term structure which several models have attempted to reproduce. However, the implied volatility surface also changes dynamically over time in a way that is not taken into account by current modelling approaches, giving rise to ‘Vega’ risk in o...
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ژورنال
عنوان ژورنال: The Journal of Computational Finance
سال: 1998
ISSN: 1460-1559
DOI: 10.21314/jcf.1998.022