2025/02/11 by Daniele Angelini, Angelini, Daniele, Fabrizio Di Sciorio +1
Economics, Econometrics and Finance · #Computational Finance (q-fin.CP) #FOS: Economics and business #Financial Markets and Investment Strategies #Insurance and Financial Risk Management #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2502.07518
openalex publication_date 2025/02/11 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Implied volatility IV is a key metric in financial markets, reflecting market expectations of future price fluctuations. Research has explored IV's relationship with moneyness, focusing on its connection to the implied Hurst exponent H. Our study reveals that H approaches 1/2 when moneyness equals 1, marking a critical point in market efficiency expectations. We developed an IV model that integrates H to capture these dynamics more effectively. This model considers the interaction between H and the underlying-to-strike price ratio S/K, crucial for capturing IV variations based on moneyness. Using Optuna optimization across multiple indexes, the model outperformed SABR and fSABR in accuracy. This approach provides a more detailed representation of market expectations and IV-H dynamics, improving options pricing and volatility forecasting while enhancing theoretical and pratcical financial analysis.