Normalizing volatility transforms and general parameterization of volatility smile

Name: Normalizing volatility transforms and general parameterization of volatility smile
Creator: Vladimir Lucic
Keywords: 0502 economics and business, 05 social sciences, 0101 mathematics, 01 natural sciences

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2021 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

Authors: Vladimir Lucic;

doi: 10.2139/ssrn.3835233

Normalizing volatility transforms and general parameterization of volatility smile

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Abstract

We provide an alternative proof of monotonicity of normalizing volatility transforms (NVTs) due to Fukasawa (2012), and then obtain a general formula for volatility surface for which the NVTs are increasing. This is used to obtain several results related to butterfly arbitrage and asymptotic behavior of implied volatility for large strikes.

Related Organizations

Imperial College London
United Kingdom

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