Smiling under stochastic volatility

• Autores: Angel León Valle, Gonzalo Rubio Irigoyen
• Localización: Spanish economic review, ISSN 1435-5469, Vol. 6, Nº 1, 2004, págs. 53-76
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Dialnet Métricas: 1 Cita
• Resumen

  • This paper studies the behavior of the implied volatility function (smile) when the true distribution of the underlying asset is consistent with the stochastic volatility model proposed by Heston (1993). The main result of the paper is to extend previous results applicable to the smile as a whole to alternative degrees of moneyness. The conditions under which the implied volatility function changes whenever there is a change in the parameters associated with Hestons stochastic volatility model for a given degree of moneyness are given.