English, Article edition: ON THE RELATIONSHIP BETWEEN THE CALL PRICE SURFACE AND THE IMPLIED VOLATILITY SURFACE CLOSE TO EXPIRY MICHAEL ROPER; MAREK RUTKOWSKI

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Bookmark: http://trove.nla.gov.au/version/15745
Physical Description
  • article
Language
  • English

Edition details

Title
  • ON THE RELATIONSHIP BETWEEN THE CALL PRICE SURFACE AND THE IMPLIED VOLATILITY SURFACE CLOSE TO EXPIRY
Author
  • MICHAEL ROPER
  • MAREK RUTKOWSKI
Physical Description
  • article
Notes
  • We examine the asymptotic behaviour of the call price surface and the associated Black-Scholes implied volatility surface in the small time to expiry limit under the condition of no arbitrage. In the final section, we examine a related question of existence of a market model with non-convergent implied volatility. We show that there exist arbitrage free markets in which implied volatility may fail to converge to any value, finite or infinite.
  • Option pricing, implied volatility, logarithmic limit, Black-Scholes formula, asymptotic and approximate formulae
  • RePEc:wsi:ijtafx:v:12:y:2009:i:04:p:427-441
Language
  • English
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