# Tagged Questions

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### Downward sloping smile in normal model

We consider an stock price $S$ following a normal model: $dS_t = \sigma dW_t$ We can write this as $\frac{dS_t}{S_t}=\frac{\sigma}{S_t}dW_t$ Hence we can see that $S$ follows a "log-normal" ...
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### Code for quasi-Gaussian model (Cheyette model)

I'm looking into the quasi-Gaussian model with linear local volatility as explained by Andersen and Piterbarg (Interest Rate Modeling, Volume 2). I'm trying to calibrate this model and implement it. I ...
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### Pricing variance swaps using Monte Carlo

For pricing variance swaps there is the well-known formula as sum of OTM options weighted by the inverse of the squared strike (see e.g. here). Would it also be valid to derive the local-volatility ...
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### Implied volatility

I have a question about calculating the implied vol. Assuming the implied vol that a option will expire in 1 day is $\sigma_1$, and the implied vol that the option will expire in 2 days is $\sigma_2$. ...
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### Implied Volatility as proxy for instantaneous volatility

In many papers and book I have found a reasoning that it is well summarized in this paper as "The first proxy we use is an unadjusted Black-Scholes proxy in which the implied volatility of a short-...
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### Local volatility grids - Monte carlo - Implementation [closed]

I read the paper "Monte Carlo pricing with local volatility grids" (authors: D.F. Abasto, B. Hientzsch and M.P. Kust) and I would like to know if anyone on this forum had a chance to implement it as I ...
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### Local Volatility vs. Stochastic Volatility

Are there any empirical observations or practices when to prefer Local Volatility Model for pricing over Stochastic Model or vice versa?
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### For pricing, what types of Exotic Options are suitable using Local Volatility Model / Stochastic Volatility Model?

I understand that Stochastic Vol Models should be used when Exotic Option payoff is Volatility dependent (such as Variance Swaps and Volatility Swaps). Stochastic Vol Models should also be used when ...