In this article, we give a general treatment of the Vanna-Volga mark-to-market volatility smile correction in application to pricing of contracts with European exercise on a single underlying. The method remains applicable in cases of delayed or misaligned expiries and absolute dividends. It is also applied to cases of time-dependent instantaneous volatility, multiple underlying assets and random interest rates. We also offer computation of the underlying volatility from market data and most valuable correction using more than three traded options.

Author: Yuriy Shkolnikov

Download Numerix Research Paper

Complete the form below to download this complimentary research paper.

Select Form: 

Form #5: Research

Keep me informed of future research from Numerix:

Sign me up to receive "Thinking Derivatively" monthly newsletter by Numerix:

* Required fields
conference

Asia Risk Congress Virtual

video blog

Numerix: Pushing Boundaries to Create Breakthrough Technology

product

CrossAsset Structured Finance

conference

Asia Risk Congress

product

CrossAsset - Leading the Industry in Advanced Models and Methods

content collection

Numerix Quant Tech Resource Hub

on-demand webinar

SRP Europe Conference 2021: Optimizing Financial Valuations to Improve Investor Experience

on-demand webinar

QuantMinds 2020: Modelling Energy Curves for XVA

conference

QuantMinds in Focus

on-demand webinar

Quantitative R&D Innovations Update

on-demand webinar

Neural Networks with Asymptotics Control

quantitative research

Machine Learning: Deep Asymptotics