THE SMALL AND LARGE TIME IMPLIED VOLATILITIES IN THE MINIMAL MARKET MODEL

Zhi Jun Guo () and Eckhard Platen ()
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Zhi Jun Guo: School of Computing, Engineering and Mathematics, University of Western Sydney, Locked Bag 1797, Penrith, NSW 2751, Australia

International Journal of Theoretical and Applied Finance (IJTAF), 2012, vol. 15, issue 08, 1-23

Abstract: This paper derives explicit formulas for both the small and the large time limits of the implied volatility in the minimal market model. It is shown that interest rates do impact on the implied volatility in the long run, even though they are negligible in the short time limit.

Keywords: Small and large time implied volatilities; benchmark approach; square-root process; the minimal market model (search for similar items in EconPapers)
Date: 2012
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http://www.worldscientific.com/doi/abs/10.1142/S0219024912500574
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Related works:
Working Paper: The Small and Large Time Implied Volatilities in the Minimal Market Model (2011)
Working Paper: The Small and Large Time Implied Volatilities in the Minimal Market Model (2011)
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DOI: 10.1142/S0219024912500574

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