Asymptotic Formulas with Error Estimates for Call Pricing Functions and the Implied Volatility at Extreme Strikes
Pricing of Securities
2009-06-03 v1
Abstract
In this paper, we obtain asymptotic formulas with error estimates for the implied volatility associated with a European call pricing function. We show that these formulas imply Lee's moment formulas for the implied volatility and the tail-wing formulas due to Benaim and Friz. In addition, we analyze Pareto-type tails of stock price distributions in uncorrelated Hull-White, Stein-Stein, and Heston models and find asymptotic formulas with error estimates for call pricing functions in these models.
Cite
@article{arxiv.0906.0394,
title = {Asymptotic Formulas with Error Estimates for Call Pricing Functions and the Implied Volatility at Extreme Strikes},
author = {A. Gulisashvili},
journal= {arXiv preprint arXiv:0906.0394},
year = {2009}
}