Journal article
Fine-tune your smile: Correction to Hagan et al
- Abstract:
- In this small note we use results derived in Berestycki et al. to correct the celebrated formulae of Hagan et al. We derive explicitly the correct zero order term in the expansion of the implied volatility in time to maturity. The new term is consistent as β → 1. Furthermore, numerical simulations show that it reduces or eliminates known pathologies of the earlier formula.
- Publication status:
- Published
- Peer review status:
- Reviewed (other)
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Authors
Funding
Bibliographic Details
- Publisher:
- Willmott Publisher's website
- Journal:
- Wilmott Magazine Journal website
- Volume:
- 2008
- Publication date:
- 2008-05-01
- Source identifiers:
-
189180
Item Description
Terms of use
- Copyright date:
- 2008
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