A New Factor to Explain Implied Volatility Smirk

José Fajardo ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we find empirical evidence of a new smirk factor, obtained from the jump structure of the risk neutral distribution of the underlying Lévy process. As an application we show how to price a barrier style contract.

Keywords: Skewness; Lévy processes; Implied volatility smirk (search for similar items in EconPapers)
JEL-codes: C52 C58 G13 (search for similar items in EconPapers)
Date: 2016-05-31
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:71809

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