Mike Tehranchi
Title of research: Call price surface models
Call price surface models. It is well-known that the risk-neutral distribution of the future price of a given asset can be recovered from the current prices (or equivalently, implied volatilities) of call options written on that asset of various strike prices and maturity dates. Risk-neutral distributions are used by financial practitioners to price and hedge derivative contingent claims. Call prices can be analysed via a certain mathematical transformation, giving rise to a novel, yet very tractable, family of arbitrage-free call surfaces. This transformation will be used to understand various features of the implied volatility smile, such as the skew and shape of the wings, as well as its dynamics.