The Exact Smile of some Local Volatility Models
classification
💱 q-fin.CP
q-fin.GNq-fin.PR
keywords
volatilityframeworkimpliedlocalmodelssmilecev-likeclass
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We introduce a new class of local volatility models. Within this framework, we obtain expressions for both (i) the price of any European option and (ii) the induced implied volatility smile. As an illustration of our framework, we perform specific pricing and implied volatility computations for a CEV-like example. Numerical examples are provided.
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