On the second derivative of the at-the-money implied volatility in stochastic volatility models

Elisa Alòs () and Jorge A. León
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Elisa Alòs: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418685

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper we compute analytically the at-the-money second derivative of the implied volatility curve as a function of the strike price, for correlated stochastic volatility models. We obtain an expression for the short-time limit of this second derivative in terms of the first and second Malliavin derivatives of the volatility process and the correlation parameter.

Keywords: Anticipating Itô's formula; Malliavin calculus; Hull and White formula; stochastic volatility models (search for similar items in EconPapers)
Date: 2014-11, Revised 2016-07
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