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  1. Math

Local Volatility in Terms of Implied Volatility

PreviousThe Difference between 127.0.0.1 and 0.0.0.0NextMean and Variance of Squared Gaussian

Last updated 12 months ago

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Loosely speaking:

  • Local volatility is the instantaneous volatility at time T if the spot is S at that time.

  • Implied volatility is the expected integrated volatility from today up to time T if the spot ends up at S at that time.

    1. Note that there is a typo in the article

➗
Local volatility surface corresponding to the implied volatility surface
Lecture 1: Stochastic Volatility and Local Volatility
Derivation of Local Volatility
In Dupire's paper, why is (𝑆𝑡,𝑡) in the (𝐾,𝑇) space?
21-256: Implicit partial differentiation