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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| 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 |
