Options on Bonds: Implied Volatilities from Affine Short-Rate Dynamics
Mathematical Finance
2021-06-09 v1
Abstract
We derive an explicit asymptotic approximation for the implied volatilities of Call options written on bonds assuming the short-rate is described by an affine short-rate model. For specific affine short-rate models, we perform numerical experiments in order to gauge the accuracy of our approximation.
Cite
@article{arxiv.2106.04518,
title = {Options on Bonds: Implied Volatilities from Affine Short-Rate Dynamics},
author = {Matthew Lorig and Natchanon Suaysom},
journal= {arXiv preprint arXiv:2106.04518},
year = {2021}
}
Comments
28 pages, 6 figures