Option pricing and implied volatilities in a 2-hypergeometric stochastic volatility model
Date of Issue2015
School of Physical and Mathematical Sciences
We derive closed-form analytical approximations in terms of series expansions for option prices and implied volatilities in a 2-hypergeometric stochastic volatility model with correlated Brownian motions. As in Han et al. (2013), these expansions allow us to recover the well-known skew and smile phenomena on implied volatility surfaces, depending on the values of the correlation parameter.
Applied Mathematics Letters
© 2015 Elsevier Ltd. This is the author created version of a work that has been peer reviewed and accepted for publication by Applied Mathematics Letters, Elsevier. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [http://dx.doi.org/10.1016/j.aml.2015.09.008].