On the Bachelier implied volatility at extreme strikes
Mathematical Finance
2022-11-21 v1 Pricing of Securities
Abstract
What kind of implied volatility extrapolation is appropriate? Roger Lee proved that the Black-Scholes implied variance can not grow faster than linearly in log-moneyness. This paper investigates what happens in the Bachelier (or Normal) implied volatility world, making sure to cover the various aspects of vanilla option arbitrages.
Cite
@article{arxiv.2211.10232,
title = {On the Bachelier implied volatility at extreme strikes},
author = {Fabien Le Floc'h},
journal= {arXiv preprint arXiv:2211.10232},
year = {2022}
}