Title: CEV with Shifted Variance and its Volatility Smile
Abstract: We propose a CEV-like local stochastic volatility model that that fixes one problem with the CEV model; namely, when the elasticity of variance is negative our local volatility function does not go to zero as the value of the underlying goes to infinity. Within our framework, we obtain an explicit expressions for both (i) the price of any European option and (ii) the implied volatility smile.
Publication Year: 2012
Publication Date: 2012-07-03
Language: en
Type: article
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Cited By Count: 1
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