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Convergence of Heston to SVI

Please always quote using this URN:urn:nbn:de:0296-matheon-8565
  • In this short note, we prove by an appropriate change of variables that the SVI implied volatility parameterization presented in~\cite{Gatheral} and the large-time asymptotic of the Heston implied volatility derived in~\cite{FJM} agree algebraically, thus confirming a conjecture from~\cite{Gatheral} as well as providing a simpler expression for the asymptotic implied volatility in the Heston model. We show how this result can help in interpreting SVI parameters.

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Metadaten
Author:Antoine Jacquier
URN:urn:nbn:de:0296-matheon-8565
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:799
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