A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Study on skew and curvature of implied and local volatilities using Malliavin calculus.
Study local volatility from rough volatility models, finding new skew rule.
Study on implied volatility of Asian options with stochastic volatility.
Paper proves SVV model reproduces power-law skew in implied volatilities.
Enhanced SABR model captures complex volatility smiles in Chinese financial options.
Using Malliavin Calculus techniques, we derive closed-form expressions for the at-the-money behaviour of the forward implied volatility, its skew and its curvature, in general Markovian stochastic volatility models with continuous paths.
Study on implied volatility of Inverse options under stochastic volatility models.
The paper examines short-term volatilities in equity indexes using a ranking procedure.
The implied volatility skew has received relatively little attention in the literature on short-term asymptotics for financial models with jumps, despite its importance in model selection and calibration. We rectify this by providing high-order asymptotic expansions for the at-the-money implied volatility skew, under a…
The paper analyzes implied volatility for European and Asian options under stochastic volatility Bachelier model.
The paper studies estimation of parameters of diffusion market models from historical data. The standard definition of implied volatility for these models presents its value as an implicit function of several parameters, including the risk-free interest rate. In reality, the risk free interest rate is unknown and need …
The ADO-Heston model approximates market implied skew in vanilla options.
Modeling implied volatility surface dynamics with Hawkes kernels.
Paper derives new option pricing formulas and approximations for a local volatility model with discontinuity.
DCNN improves volatility smile and skewness calibration without arbitrage constraints.
We develop a method to study the implied volatility for exotic options and volatility derivatives with European payoffs such as VIX options. Our approach, based on Malliavin calculus techniques, allows us to describe the properties of the at-the-money implied volatility (ATMI) in terms of the Malliavin derivatives of t…
We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European options which are written in terms of the implied volatility are given. In particular…
First, we give an asymptotic expansion of short-dated at-the-money implied volatility that refines the preceding works and proves in particular that non-rough volatility models are inconsistent to a power law of volatility skew. Second, we show that given a power law of volatility skew in an option market, a continuous…
Study shows different types of volatility and skewness changes affect stock prices.
Model predicts jump risk premia influencing cryptocurrency futures and option performance.
Flexible model captures commodity skews with maturity effects.
The left tail of the implied volatility skew, coming from quotes on out-of-the-money put options, can be thought to reflect the market's assessment of the risk of a huge drop in stock prices. We analyze how this market information can be integrated into the theoretical framework of convex monetary measures of risk. In …
A small-time Edgeworth expansion of the density of an asset price is given under a general stochastic volatility model, from which asymptotic expansions of put option prices and at-the-money implied volatilities follow. A limit theorem for at-the-money implied volatility skew and curvature is also given as a corollary.…
Study on short-term behavior of ATM-IV for jump-diffusion model.
We revisit the ``Smile Dynamics'' problem, which consists in relating the implied leverage (i.e. the correlation of the at-the-money volatility with the returns of the underlying) and the skew of the option smile. The ratio between these two quantities, called ``Skew-Stickiness Ratio'' (SSR) by Bergomi (Smile Dynamics …
Study examines short-term IVS dynamics using a model-independent approach.
We review and illustrate how the volatility smile translates into a probability distribution, the market-implied probability distribution representing believes priced in. The effects of changes in the smile are examined. Special attention is given to the effects of slope, which might appear at first counter-intuitive. …
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the validity of a specific model - i.e. the method is robust. The strategy is given explic…
New encoding improves volatility surface generation and risk management.
We revisit the problem of pricing options with historical volatility estimators. We do this in the context of a generalized GARCH model with multiple time scales and asymmetry. It is argued that the reason for the observed volatility risk premium is tail risk aversion. We parametrize such risk aversion in terms of thre…
The Black-Scholes implied volatility skew at the money of SPX options is known to obey a power law with respect to the time-to-maturity. We construct a model of the underlying asset price process which is dynamically consistent to the power law. The volatility process of the model is driven by a fractional Brownian mot…
The paper examines the short-time implied volatility of additive processes and finds key parameters.
Deep learning calibrates a rough Heston model to match implied volatilities.
The paper provides formulas for volatility in various models, including rough volatility.
Innovative extensions to option pricing models using asymmetric Brownian motion and random walk approaches.
We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied volatilities which demonstrate smile or skew. An arbitrage-free calibration algorithm i…
Derives token price process for AMM tokens, finds leverage effect and pricing discrepancies.
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local volatility/stochastic volatility mixture model, where the mixture parameter tunes that covariance. T…
The rough Bergomi model, introduced by Bayer, Friz and Gatheral [Quant. Finance 16(6), 887-904, 2016], is one of the recent rough volatility models that are consistent with the stylised fact of implied volatility surfaces being essentially time-invariant, and are able to capture the term structure of skew observed in e…
We present an explicit hedging strategy, which enables to prove arbitrageness of market incorporating at least two assets depending on the same random factor. The implied Black-Scholes volatility, computed taking into account the form of the graph of the option price, related to our strategy, demonstrates the "skewness…
Paper addresses xVA models for market-implied skew and smile.
The paper demonstrates that a pure-diffusion 3/2 model is able to capture the observed upward-sloping implied volatility skew in VIX options. This observation contradicts a common perception in the literature that jumps are required for the consistent modelling of equity and VIX derivatives. The pure-diffusion model, h…
Sparked by Alòs, León, and Vives (2007); Fukasawa (2011, 2017); Gatheral, Jaisson, and Rosenbaum (2018), so-called rough stochastic volatility models such as the rough Bergomi model by Bayer, Friz, and Gatheral (2016) constitute the latest evolution in option price modeling. Unlike standard bivariate diffusion models s…
Study provides LDP for non self-similar stochastic volatility models.
A new paradigm recently emerged in financial modelling: rough (stochastic) volatility, first observed by Gatheral et al. in high-frequency data, subsequently derived within market microstructure models, also turned out to capture parsimoniously key stylized facts of the entire implied volatility surface, including extr…
Proposes NDIG model to capture bitcoin volatility and option pricing.
Derives formula for skew stickiness ratio in asset price and volatility dynamics.
Anomalous diffusions arise as scaling limits of continuous-time random walks (CTRWs) whose innovation times are distributed according to a power law. The impact of a non-exponential waiting time does not vanish with time and leads to different distribution spread rates compared to standard models. In financial modellin…