A note on essential smoothness in the Heston model

Martin Forde, Antoine Jacquier () and Aleksandar Mijatovic

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Abstract: This note studies an issue relating to essential smoothness that can arise when the theory of large deviations is applied to a certain option pricing formula in the Heston model. The note identifies a gap, based on this issue, in the proof of Corollary 2.4 in \cite{FordeJacquier10} and describes how to circumvent it. This completes the proof of Corollary 2.4 in \cite{FordeJacquier10} and hence of the main result in \cite{FordeJacquier10}, which describes the limiting behaviour of the implied volatility smile in the Heston model far from maturity.

Date: 2011-07
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Citations: View citations in EconPapers (1)

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Journal Article: A note on essential smoothness in the Heston model (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1107.4881

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