A closed-form solution for spot volatility from options under limited data

Aoran Zhang and Chunyang Zhou

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: In this article, the closed-form solution for spot volatility from European options is investigated. The price of the underlying asset follows a diffusion process with stochastic volatility. This approach requires only four European option contracts, making it applicable within limited data constraints. Numerical simulations are presented to prove the effectiveness and robustness.

Keywords: Closed-form solution; Spot volatility; Stochastic volatility; Limited data (search for similar items in EconPapers)
JEL-codes: C51 C52 G12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008717

DOI: 10.1016/j.frl.2024.105841

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