Large deviations for the extended Heston model: the large-time case
File(s)Continuous_affine_Current_New_Correction.pdf (162.25 KB)
Accepted version
Author(s)
Jacquier, A
Mijatovic, A
Type
Journal Article
Abstract
We study here the large-time behaviour of all continuous affine stochastic
volatility models (in the sense of Keller-Ressel) and deduce a closed-form
formula for the large-maturity implied volatility smile. Based on refinements
of the Gartner-Ellis theorem on the real line, our proof reveals pathological
behaviours of the asymptotic smile. In particular, we show that the condition
assumed in Gatheral and Jacquier under which the Heston implied volatility
converges to the SVI parameterisation is necessary and sufficient.
volatility models (in the sense of Keller-Ressel) and deduce a closed-form
formula for the large-maturity implied volatility smile. Based on refinements
of the Gartner-Ellis theorem on the real line, our proof reveals pathological
behaviours of the asymptotic smile. In particular, we show that the condition
assumed in Gatheral and Jacquier under which the Heston implied volatility
converges to the SVI parameterisation is necessary and sufficient.
Date Issued
2014-07-30
Date Acceptance
2013-07-15
Citation
Asia-Pacific Financial Markets, 2014, 21 (3), pp.263-280
ISSN
1573-6946
Publisher
Springer
Start Page
263
End Page
280
Journal / Book Title
Asia-Pacific Financial Markets
Volume
21
Issue
3
Copyright Statement
© Springer Japan 2014. The final publication is available at Springer via http://dx.doi.org/10.1007/s10690-014-9185-8
Description
31.07.15 KB. OK to add accepted version to spiral, 12 month embargo expired.
Identifier
http://arxiv.org/abs/1203.5020v1
Publication Status
Published