The Bachelier implied volatility: A Malliavin calculus approach.

Speaker: Prof. Elisa Alos, Dept. of Economics and Business, University of Pompeu Fabra, Barcelona

Abstract: We introduce the main tools of Malliavin calculus and show how to use them to study the short-end behavior of skew and curvature of the implied volatility surface. This methodology allows us to obtain general formulas in terms of Malliavin derivatives that can be applied to a wide class of models including local, stochastic and rough volatilities. Numerical examples are given.