Short-maturity skew stickiness ratio under local volatility

Masaaki Fukasawa

Papers from arXiv.org

Abstract: We prove that the skew stickiness ratio converges to two at short maturity under local volatility models. This appears to be the first rigorous proof of this limit for a general time-dependent local volatility function. As a by-product, we strengthen the one-half rule of the implied volatility skew by removing uniform ellipticity and global bounds on spatial derivatives of order at least two. The proof uses a first-order Watanabe expansion.

Date: 2026-09
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