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Quantitative Finance 2009
A remark on Gatheral's 'most-likely path approximation' of implied volatilityAbstract: We give a rigorous proof of the representation of implied volatility as a time-average of weighted expectations of local or stochastic volatility. With this proof we fix the problem of a circular definition in the original derivation of Gatheral, who introduced this implied volatility representation in his book 'The Volatility Surface'.
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