The Small Maturity Implied Volatility Slope for L\'evy Models
We consider the at-the-money strike derivative of implied volatility as the maturity tends to zero. Our main results quantify the growth of the slope for infinite activity exponential Levy models. As auxiliary results, we obtain the limiting values of short maturity digital call options, using Mellin transform asymptotics. Finally, we discuss when the at-the-money slope is consistent with the steepness of the smile wings, as given by Lee's moment formula.
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- Figueroa-López, José E. & Houdré, Christian, 2009. "Small-time expansions for the transition distributions of Lévy processes," Stochastic Processes and their Applications, Elsevier, vol. 119(11), pages 3862-3889, November.
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