On The Relationship Between The Call Price Surface And The Implied Volatility Surface Close To Expiry
AbstractWe examine the asymptotic behaviour of the call price surface and the associated Black-Scholes implied volatility surface in the small time to expiry limit under the condition of no arbitrage. In the final section, we examine a related question of existence of a market model with non-convergent implied volatility. We show that there exist arbitrage free markets in which implied volatility may fail to converge to any value, finite or infinite.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 12 (2009)
Issue (Month): 04 ()
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Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
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