Huy Chau - On short-time behavior of implied volatility in a market model with indexes
| Dates: | 24 April 2024 |
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| Times: | 15:00 - 16:00 |
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| What is it: | Seminar |
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| Organiser: | Department of Mathematics |
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Huy Chau (University of Manchester) will speak at the Probability seminar.
We investigate short-term behaviours of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices follow geometric Brownian motion dynamics, the ranking mechanism can produce the observed term structure of at-the-money (ATM) implied volatility skew for equity indexes. Our proposed models showcase the ability to reconcile two seemingly contradictory features found in empirical data from equity markets: the long memory of volatilities and the power law of ATM skews. Furthermore, the models allow for the capture of a novel phenomenon termed the quasi-blow-up phenomenon.
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Lewis Fry Richardson Room G.207
Alan Turing Building
Manchester
