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A theoretical analysis of Guyon's toy volatility model

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  • Bonesini, Ofelia
  • Jacquier, Antoine
  • Lacombe, Chloé

Abstract

We provide a thorough analysis of the path-dependent volatility model introduced by Guyon [30], proving existence and uniqueness of a strong solution, characterising its behaviour at boundary points, providing asymptotic closed-form option prices as well as deriving small-time behaviour estimates.

Suggested Citation

  • Bonesini, Ofelia & Jacquier, Antoine & Lacombe, Chloé, 2025. "A theoretical analysis of Guyon's toy volatility model," LSE Research Online Documents on Economics 127342, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:127342
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    File URL: http://eprints.lse.ac.uk/127342/
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    References listed on IDEAS

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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