Convergence of At-The-Money Implied Volatilities to the Spot Volatility
10 Pages Posted: 7 Aug 2007 Last revised: 18 Sep 2012
Date Written: August 7, 2007
We study the convergence of at-the-money implied volatilities to the spot volatility in a general model with a Brownian component and a jump component of finite variation. This result is a consequence of the robustness of the Black-Scholes formula and of the central limit theorem for martingales.
Keywords: Implied volatility, spot volatility, robustness formula, martingale central limit theorem
JEL Classification: G13
Suggested Citation: Suggested Citation