Title: An approximation formula for normal implied volatility under general local stochastic volatility models
Abstract: We approximate normal implied volatilities by means of an asymptotic expansion method. The contribution of this paper is twofold: to our knowledge, this paper is the first to provide a unified approximation method for the normal implied volatility under general local stochastic volatility models. Second, we compared our method with the Monte-Carlo simulations by using the parameters calibrated to the actual market data and confirmed the accuracy.
Publication Year: 2018
Publication Date: 2018-01-01
Language: en
Type: article
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