arXiv Open Access 2024

Computing the SSR

Peter K. Friz Jim Gatheral

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Abstrak

The skew-stickiness-ratio (SSR), examined in detail by Bergomi in his book, is critically important to options traders, especially market makers. We present a model-free expression for the SSR in terms of the characteristic function. In the diffusion setting, it is well-known that the short-term limit of the SSR is 2; a corollary of our results is that this limit is $H+3/2$ where $H$ is the Hurst exponent of the volatility process. The general formula for the SSR simplifies and becomes particularly tractable in the affine forward variance case. We explain the qualitative behavior of the SSR with respect to the shape of the forward variance curve, and thus also path-dependence of the SSR.

Topik & Kata Kunci

q-fin.MF q-fin.CP

Penulis (2)

Peter K. Friz

Jim Gatheral

Format Sitasi

APA MLA BibTeX

Friz, P.K., Gatheral, J. (2024). Computing the SSR. https://arxiv.org/abs/2406.16131

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Informasi Jurnal

Tahun Terbit: 2024
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓