Short-dated smile under rough volatility: asymptotics and numerics

Abstract

In Friz et al. [Precise asymptotics for robust stochastic volatility models. Ann. Appl. Probab, 2021, 31(2), 896-940], we introduce a new methodology to analyze large classes of (classical and rough) stochastic volatility models, with special regard to short-time and small-noise formulae for option prices, using the framework [Bayer et al., A regularity structure for rough volatility. Math. Finance, 2020, 30(3), 782-832]. We investigate here the fine structure of this expansion in large deviations and moderate deviations regimes, together with consequences for implied volatility. We discuss computational aspects relevant for the practical application of these formulas. We specialize such expansions to prototypical rough volatility examples and discuss numerical evidence.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 24 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.