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A new factor to explain implied volatility smirk |
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| Authors: | José Fajardo |
| Affiliation: | Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Rio de Janeiro, Brazil |
| Abstract: | In this article, we find empirical evidence of a new smirk factor, obtained from the jump structure of the risk neutral distribution of the underlying Lévy process. As an application we show how to price a barrier style contract. |
| Keywords: | Skewness Lévy processes implied volatility smirk symmetry |