An Improved Asymptotics of Implied Volatility in the Gatheral Model

• We study the double-mean-reverting model by Gatheral. Our previous results concerning the asymptotic expansion of the implied volatility of a European call option, are improved up to order 3, that is, the error of the approximation is ultimately smaller that the 1.5th power of time to maturity plus the cube of the absolute value of the difference between the logarithmic security price and the logarithmic strike price.

Subject headings

NATURVETENSKAP  -- Matematik -- Sannolikhetsteori och statistik (hsv//swe)

NATURAL SCIENCES  -- Mathematics -- Probability Theory and Statistics (hsv//eng)

Keyword

Double-mean-reverting model

Implied volatility

Mathematics/Applied Mathematics

matematik/tillämpad matematik

Publication and Content Type

ref (subject category)

kon (subject category)