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Dupire by Jasmine Mehta is a document available to read on EtoBox.
What is Dupire about?
The document discusses local volatility models, which were developed in response to limitations in the Black-Scholes model. The Black-Scholes model assumes constant volatility, but implied volatility derived from option prices forms a "volatility smile" where volatility depends on strike price. Local volatility models allow volatility to vary based on the stock price and time, fitting market option prices better than Black-Scholes.
- Author
- Jasmine Mehta
- Language
- EN