Twofish's Blog

July 19, 2006

Question and answer:

Filed under: quantitative finance — twofish @ 12:11 am

Question: Give a volatility curve at time T, and the knowlege that the process is an exponental Levy process, is the volatility curve determined for all time?

Answer: Yes?  A volatility curve s(t, x-x_0) corresponds to a given probability distribution function p(t, x-x_0).  p(0, x-x_0) is a delta function \delta(x-x_0).  These two curves create a unique interpolation which corresponds to a unique Levy process which determines the volatility curve for all time.


Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Blog at

%d bloggers like this: