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Erschienen in:
2002 | OriginalPaper | Buchkapitel
Displaced and Mixture Diffusions for Analytically-Tractable Smile Models
verfasst von : Damiano Brigo, Fabio Mercurio
Erschienen in: Mathematical Finance — Bachelier Congress 2000
Verlag: Springer Berlin Heidelberg
Enthalten in: Professional Book Archive
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We propose two different, classes of analytical models for the dynamics of an asset, price that, respectively lead to skews and smiles in the term structure of implied volatilities. Both classes are based on explicit, SDEs that, admit, unique strong solutions whose marginal densities are also provided. We then consider some particular examples in each class and explicitly calculate the European option prices implied by these models.