Stack Exchange Network

Stack Exchange network consists of 175 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

New answers tagged


In his article, Dupire (1994) developed the local volatility approach under the assumption that options are traded for a continuum of maturities and strikes. In reality, only a finite number of options generating a grid of strikes and maturities is traded. Then the reconstruction of the local volatility function is obtained by interpolation methods. However,...


Yes looks like ATM volatility. It’s forward (he also calls it forward forward volatility). Say you have the volatility of an option with 30 days maturity, $\sigma_1$ and $T_1$; and the volatility of an option with 60 days maturity, $\sigma_2$ and $T_2$.The 0-30 bucket will have $\sigma_1$ , whereas the 30-60 days bucket will have the forward volatility ...

Top 50 recent answers are included