Munich Personal RePEc Archive

A New Factor to Explain Implied Volatility Smirk

fajardo, José (2016): A New Factor to Explain Implied Volatility Smirk.

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Abstract

In this paper we find empirical evidence of a new smirk factor, obtained from the jump structure of the risk neutral distribution of the underlying Lévy process. As an application we show how to price a barrier style contract.

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