Cyril Grunspan

  1. A Note on the Equivalence between the Normal and the Lognormal Implied Volatility : A Model Free Approach.

    Authors: Cyril Grunspan
    Subjects: Pricing of Securities
    Abstract

    First, we show that implied normal volatility is intimately linked with the
    incomplete Gamma function. Then, we deduce an expansion on implied normal
    volatility in terms of the time-value of a European call option. Then, we
    formulate an equivalence between the implied normal volatility and the
    lognormal implied volatility with any strike and any model. This generalizes a
    known result for the SABR model. Finally, we adress the issue of the "breakeven
    move" of a delta-hedged portfolio.

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