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The implied volatility of forward starting options: ATM short-time level, skew and curvature

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Abstract

For stochastic volatility models, we study the short-time behaviour of the at-the-money implied volatility level, skew and curvature for forward-starting options. Our analysis is based on Malliavin Calculus techniques.

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  • Elisa Alòs & Antoine Jacquier & Jorge A. León, 2017. "The implied volatility of forward starting options: ATM short-time level, skew and curvature," Economics Working Papers 1568, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1568
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    1. Susanne Kruse & Ulrich Nögel, 2005. "On the pricing of forward starting options in Heston’s model on stochastic volatility," Finance and Stochastics, Springer, vol. 9(2), pages 233-250, April.
    2. Unknown, 2005. "Forward," 2005 Conference: Slovenia in the EU - Challenges for Agriculture, Food Science and Rural Affairs, November 10-11, 2005, Moravske Toplice, Slovenia 183804, Slovenian Association of Agricultural Economists (DAES).
    3. Elisa Alòs & Jorge León & Josep Vives, 2007. "On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility," Finance and Stochastics, Springer, vol. 11(4), pages 571-589, October.
    4. Antoine Jacquier & Patrick Roome, 2012. "Asymptotics of forward implied volatility," Papers 1212.0779, arXiv.org, revised Feb 2015.
    5. Hull, John C & White, Alan D, 1987. "The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
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    More about this item

    Keywords

    Forward starting options; implied volatility; Malliavin calculus; stochastic volatility models;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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