Siddiqi, Hammad (2014): Analogy Making and the Structure of Implied Volatility Skew.
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Abstract
An analogy based call option pricing model is put forward. The model provides a new explanation for the implied volatility skew puzzle. The analogy model is consistent with empirical findings about returns from well studied option strategies such as covered call writing and zerobeta straddles. The analogy based stochastic volatility and the analogy based jump diffusion models are also put forward. The analogy based stochastic volatility model generates the skew even when there is no correlation between the stock price and volatility processes, whereas, the analogy based jump diffusion model does not require asymmetric jumps for generating the skew.
Item Type:  MPRA Paper 

Original Title:  Analogy Making and the Structure of Implied Volatility Skew 
Language:  English 
Keywords:  Implied Volatility Skew, Implied Volatility Smile, Analogy Making, Stochastic Volatility, Jump Diffusion, Covered Call Writing, ZeroBeta Straddle 
Subjects:  G  Financial Economics > G1  General Financial Markets > G13  Contingent Pricing ; Futures Pricing 
Item ID:  63133 
Depositing User:  Dr. Hammad Siddiqi 
Date Deposited:  21 Mar 2015 14:29 
Last Modified:  27 Sep 2019 16:41 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/63133 
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