Asymptotic Expansions of the Lognormal Implied Volatility: A Model Free Approach
18 Pages
Posted: 29 Nov 2011
Last revised: 6 Dec 2011
Ecole Superieure d'Ingenierie Leonard de Vinci (ESILV)
Date Written: November 29, 2011
Abstract
We invert the Black-Scholes formula. We consider the cases low strike, large strike, short maturity and large maturity. We give explicitly the first 5 terms of the expansions. A method to compute all the terms by induction is also given. At the money, we have a closed form formula for implied lognormal volatility in terms of a power series in call price.
Keywords: smile asymptotics, implied lognormal volatility
JEL Classification: G12, G13, C65
Suggested Citation:
Suggested Citation
Grunspan, Cyril, Asymptotic Expansions of the Lognormal Implied Volatility: A Model Free Approach (November 29, 2011). Available at SSRN: https://ssrn.com/abstract=1965977 or http://dx.doi.org/10.2139/ssrn.1965977
