On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility

Elisa Alòs (), Jorge A. León and Josep Vives
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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 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 (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (1)

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