Convergence of Heston to SVI

Details Convergence of Heston to SVI Convergence of Heston to SVI

2010-02-18

arxiv.org/abs/1002.3633v1

Economy

Quantitative Finance

Pricing of Securities

5 pages

Scientific paper

In this short note, we prove by an appropriate change of variables that the SVI implied volatility parameterization presented in Gatheral's book and the large-time asymptotic of the Heston implied volatility agree algebraically, thus confirming a conjecture from Gatheral as well as providing a simpler expression for the asymptotic implied volatility in the Heston model. We show how this result can help in interpreting SVI parameters.

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