Paper #968
- Title:
- On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility
- Authors:
- Elisa Alòs, Jorge A. León and Josep Vives
- Date:
- June 2006
- Abstract:
- In this paper we use Malliavin calculus techniques to obtain an expression for the short-time behavior of the at-the-money implied volatility skew for a generalization of the Bates model, where the volatility does not need to be neither a difussion, nor a Markov process as the examples in section 7 show. This expression depends on the derivative of the volatility in the sense of Malliavin calculus.
- Keywords:
- Black-Scholes formula, derivative operator, Itô's formula for the Skorohod integral, jump-diffusion stochastic volatility model
- JEL codes:
- G12, G13
- Area of Research:
- Statistics, Econometrics and Quantitative Methods
- Published in:
- Finance Stoch (2007) 11: 571- 589
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