In this article we propose a generalisation of the recent work of Gatheral and Jacquier on explicit arbitrage-free parameterisations of implied volatility surfaces. We also discuss extensively the notion of arbitrage freeness and Roger Lee's moment formula using the recent analysis by Roper. We further exhibit an arbit…
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4 results for “arbitrage-freeness”
A unified view of LIBOR modelsq-fin.MF
Unified framework for modeling LIBOR rates using semimartingales.
problem Modeling arbitrage-free LIBOR rates with general dynamics.
method General semimartingales as driving processes, generic functional forms, sufficient conditions for arbitrage-freeness and martingales.
result Derivation of sufficient conditions for arbitrage-freeness and martingales under forward measures.
In this paper, we analyze the diversity of term structure functions (e.g., yield curves, swap curves, credit curves) constructed in a process which complies with some admissible properties: arbitrage-freeness, ability to fit market quotes and a certain degree of smooth- ness. When present values of building instruments…
Proposes a method to construct risk-neutral marginals from arbitrage-free option prices.
problem Lack of risk-neutral marginals that are free of arbitrage and easy to use.
method Explicit construction of risk-neutral marginals from discrete arbitrage-free option prices.
result Explicit construction guarantees risk-neutral marginals free of butterfly and calendar arbitrage.