Explicit Implied Volatilities for Multifactor Local-Stochastic Volatility Models PDF Download

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Explicit Implied Volatilities for Multifactor Local-Stochastic Volatility Models

Explicit Implied Volatilities for Multifactor Local-Stochastic Volatility Models PDF Author: Matthew Lorig
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Languages : en
Pages : 36

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Book Description
We consider an asset whose risk-neutral dynamics are described by a general class of local-stochastic volatility models and derive a family of asymptotic expansions for European-style option prices and implied volatilities. Our implied volatility expansions are explicit; they do not require any special functions nor do they require numerical integration. To illustrate the accuracy and versatility of our method, we implement it under five different model dynamics: CEV local volatility, quadratic local volatility, Heston stochastic volatility, 3/2 stochastic volatility, and SABR local-stochastic volatility.