A new factor to explain implied volatility smirk

A new factor to explain implied volatility smirk

In this article, we find empirical evidence of a new smirk factor, obtained from the jump structure of the risk neutral distribution of the underlying Lévy process. As an application we show how to price a barrier style contract.

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Veröffentlicht in:Applied economics 2017-08, Vol.49 (40), p.4026-4034
1. Verfasser: Fajardo, José
Format: Artikel
Sprache:eng
Schlagworte:
Economic analysis
Economic theory
implied volatility smirk
Lévy processes
Random walk theory
Securities prices
Skewness
symmetry
Volatility
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Beschreibung
Zusammenfassung:In this article, we find empirical evidence of a new smirk factor, obtained from the jump structure of the risk neutral distribution of the underlying Lévy process. As an application we show how to price a barrier style contract.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2016.1273505