Deep OTM implied Variance Can Never Rise


Market participants commonly extrapolate the implied volatility skew for far out of the money strikes with a flat asymptote. We show that if it were possible to trade in a frictionless way options priced according to this... [ view full abstract ]


  1. Bruno Dupire (Bloomberg LP)

Topic Areas

Asymptotics , Options , Stochastic Volatility


FR-A-BU » Variance, Implied Volatility and Pricing (10:00 - Friday, 20th July, Burke Theater)

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