For more information about this meeting, contact Victor Nistor, Anna Mazzucato, Manfred Denker.
|Title:||Asymptotic expansions in local volatility models|
|Seminar:||Probability and Financial Mathematics Seminar|
|Speaker:||Dan Parjol, JP Morgan|
|Local volatility models are widely used in finance for pricing exotic products on equities, interest rates and foreign exchange assets, which are consistent with market prices for vanilla options. Usually these models are formulated such that they reproduce the known log-normal implied volatilities of the vanilla options with different strikes and maturities. The talk will discuss an alternative approach, which makes use of the normal implied volatilities, first introduced by Bachelier in the study of financial markets. A small-time expansion for the normal implied volatility is discussed, which is compared with the corresponding expansion for the log-normal case. The results are illustrated on a few examples of local volatility models, comparing known exact solutions or numerical solutions against the small-time expansion.|
Room Reservation Information
|Date:||09 / 20 / 2011|
|Time:||01:20pm - 02:20pm|