The exact smile of certain local volatility models

Matthew Lorig

Quantitative Finance, 2013, vol. 13, issue 6, 897-905

Abstract: We introduce a new class of local volatility models. Within this framework, we obtain expressions for both (i) the price of any European option and (ii) the induced implied volatility smile. As an illustration of our framework, we perform specific pricing and implied volatility computations for a CEV-like example. Numerical examples are provided.

Date: 2013
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/14697688.2012.749357

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