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A Hull and White formula for a general stochastic volatility jump-diffusion model with applications to the study of the short-time behavior of the implied volatility

Listed author(s):
  • Elisa Alòs


  • Jorge A. León
  • Monique Pontier
  • Josep Vives
Registered author(s):

    In this paper, generalizing results in Alòs, León and Vives (2007b), we see that the dependence of jumps in the volatility under a jump-diffusion stochastic volatility model, has no effect on the short-time behaviour of the at-the-money implied volatility skew, although the corresponding Hull and White formula depends on the jumps. Towards this end, we use Malliavin calculus techniques for Lévy processes based on Løkka (2004), Petrou (2006), and Solé, Utzet and Vives (2007).

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    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1081.

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    Date of creation: Apr 2008
    Handle: RePEc:upf:upfgen:1081
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