Fine-tune your smile: Correction to Hagan et al
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 s...
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Format: | Journal article |
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Willmott
2008
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