WG Risk :“Pricing short-term volatility surfaces”

The Working Group on Risk - CREAR, with the support of the ESSEC IDO dpt/Ceressec, Institut des actuaires, Labex MME-DII (CY), and the group Risques AEF - SFdS, has the pleasure to invite you to the seminar by:

Dr. Guido GAZZANI, University of Verona, Italy

Guido Gazzani is a Researcher at the Department of Economics of the University of Verona. After a PhD in Statistics and Operations Research, Univ. Vienna, with emphasis in Financial Mathematics (joint supervision of I. Klein and C. Cuchiero), he spent one year as post-doc at the École Nationale des Ponts et Chaussées (ENPC) in France, where he worked with J. Guyon on path-dependent volatility models, and some months as post-doc at the University of Verona where he worked with R. Renò on Edgeworth-type expansions. His research interests include signature processes, computational finance, in particular efficient derivative pricing and volatility modeling.

“Pricing short-term volatility surfaces”

We propose a non-parametric approach for pricing effectively multiple short maturities, leveraging on an Edgeworth-type expansion of the log-returns characteristic function. We enhance the model specification with a deterministic shift extension, which induces the necessary term structure in the instantaneous volatility to calibrate simultaneously to different implied volatility smiles. An extensive numerical analysis is conducted showing how the Edgeworth expansion with shift extension outperforms other state-of-the-art models adopted for fast pricing, namely an instance of multi-factor with jumps in levels and variance and the rough Heston model with parametric initial forward variance.

Dual format:

ESSEC Paris La Défense (CNIT), Room TBA, and via Zoom, please click here .