W-shaped implied volatility curves in a variance-gamma mixture model
Mathematical Finance
2022-09-30 v1 Probability
Abstract
In liquid option markets, W-shaped implied volatility curves have occasionally be observed. We show that such shapes can be reproduced in a mixture of two variance-gamma models. This is in contrast to lognormal models, where at least three different distributions have to be mixed in order to produce a W-shape, as recently shown by Glasserman and Pirjol.
Cite
@article{arxiv.2209.14726,
title = {W-shaped implied volatility curves in a variance-gamma mixture model},
author = {Martin Keller-Ressel},
journal= {arXiv preprint arXiv:2209.14726},
year = {2022}
}
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12 pages