The Exact Smile of some Local Volatility Models
Computational Finance
2012-11-12 v4 General Finance
Pricing of Securities
Abstract
We introduce a new class of local volatility models. Within this framework, we obtain expressions for both (i) the price of any European option and (ii) the induced implied volatility smile. As an illustration of our framework, we perform specific pricing and implied volatility computations for a CEV-like example. Numerical examples are provided.
Cite
@article{arxiv.1207.0750,
title = {The Exact Smile of some Local Volatility Models},
author = {Matthew Lorig},
journal= {arXiv preprint arXiv:1207.0750},
year = {2012}
}
Comments
14 pages, 3 figures. arXiv admin note: text overlap with arXiv:1207.1630