Explicit Caplet Implied Volatilities for Quadratic Term-Structure Models
Mathematical Finance
2022-12-09 v1
Abstract
We derive an explicit asymptotic approximation for implied volatilities of caplets under the assumption that the short-rate is described by a generic quadratic term-structure model. In addition to providing an asymptotic accuracy result, we perform experiments in order to gauge the numerical accuracy of our approximation.
Cite
@article{arxiv.2212.04425,
title = {Explicit Caplet Implied Volatilities for Quadratic Term-Structure Models},
author = {Matthew Lorig and Natchanon Suaysom},
journal= {arXiv preprint arXiv:2212.04425},
year = {2022}
}
Comments
22 pages, 4 figures. arXiv admin note: substantial text overlap with arXiv:2106.04518