2022/12/12 by Yeung, Chun Yat, Hirsa, Ali
#FOS: Economics and business #Mathematical Finance (q-fin.MF)
paper · doi:10.48550/arxiv.2212.05671
We extend upon the saddle-point equation presented in [1] to derive large-time model-implied volatility smiles, providing its theoretical foundation and studying its applications in classical models. As long as characteristic function fulfills a Lévy-type scaling behavior in large time, the approach allows us to study analytically the large-time smile behaviors under specific models, and moreover, to reach a very wide class of arbitrage-free model-inspired parametrizations, in the same manner as stochastic-volatility-inspired (SVI).