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Relations between implied and spot volatilities : Applications to FX options, Paris, 11 Oct. 2006 |
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Saturday, 04 November 2006 |
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Le Petit Déjeuner de la Finance aura lieu le Mercredi 11 Octobre 2006 de 8h à 9h30
sur le thème
Relations between implied and spot volatilities:
Applications to foreign exchange optionsprésenté par Valdo DURRLEMAN
Ecole polytechniqueAbstract:
We consider the problem of computing implied volatilities of options written on a domestic asset based on implied volatilities of options on the same asset expressed in a foreign currency and the exchange rate. We propose an original method together with explicit formulas to compute the at-the-money implied volatility, the smile's skew, convexity, and term structure for short maturities. The method is completely free of any model specification or Markov assumption; it only assumes that jumps are not present. We also investigate how the method performs on the particular example of the currency triplet dollar, euro, yen. We find a very satisfactory agreement between our formulas and the market at one week and one month maturities.
About the speaker:
Valdo DURRLEMAN is Associate Professor of Mathematical Finance at Ecole Polytechnique (France). After graduating from Ecole Polytechnique and ENSAE, he obtained a PhD in Operations Research and Financial Engineering from Princeton University. He was Assistant Professor at Stanford University from 2004 to 2006 before joining Ecole Polytechnique in 2006. His research has focused on the modeling of implied volatility surfaces and the pricing of multi-asset options.
Lieu: Maison des Polytechniciens
12 rue de Poitiers 75007 Paris. | |
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