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A note on the essential smoothness in the Heston model

Please always quote using this URN:urn:nbn:de:0296-matheon-8538
  • This note studies an issue relating to essential smoothness that can arise when the theory of large deviations is applied to a certain option pricing formula in the Heston model. The note identifies a gap, based on this issue, in the proof of Corollary 2.4 in [2] and describes how to circumvent it. This completes the proof of Corollary 2.4 in [2] and hence of the main result in [2], which describes the limiting behaviour of the implied volatility smile in the Heston model far from maturity.

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Metadaten
Author:Antoine Jacquier
URN:urn:nbn:de:0296-matheon-8538
Referee:Peter Karl Friz
Document Type:Preprint, Research Center Matheon
Language:English
Date of first Publication:2011/06/21
Release Date:2011/06/21
Tag:
Institute:Technische Universität Berlin
MSC-Classification:60-XX PROBABILITY THEORY AND STOCHASTIC PROCESSES (For additional applications, see 11Kxx, 62-XX, 90-XX, 91-XX, 92-XX, 93-XX, 94-XX)
Preprint Number:795
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