On the curvature of the smile in stochastic volatility models

  • Authors: Elisa Alòs.
  • SIAM Journal on Financial Mathematics

In this paper we compute analytically the at-The-money second derivative of the implied volatility curve as a function of the strike price, for correlated stochastic volatility models. We also obtain an expression for the short-Time limit of this second derivative in terms of the first and second Malliavin derivatives of the volatility process and the correlation parameter. Our analysis does not need the volatility to be Markovian and can be applied to the case of fractional volatility models, both with H <1/2 and H >1/2.

Subscribe to our newsletter
Want to receive the latest news and updates from the BSE? Share your details below.
Founding institutions
Distinctions
Logo BSE
© Barcelona Graduate School of
Economics. All rights reserved.
QualityTransparencyLegalCookie PolicySite map
YoutubeFacebookLinkedinInstagramX