Large Deviations for the Extended Heston Model: the Large-time Case
نویسنده
چکیده
We study here the large-time behaviour of all continuous affine stochastic volatility models (in the sense of [15]) and deduce a closed-form formula for the large-maturity implied volatility smile. Based on refinements of the Gärtner-Ellis theorem on the real line, our proof reveals pathological behaviours of the asymptotic smile. In particular, we show that the condition assumed in [10] under which the Heston implied volatility converges to the SVI parameterisation is necessary and sufficient.
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