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2026-09-12 14:12 UTC · q-fin.PR · q-fin.PR, math.PR, q-fin.MF

Yet another asymptotic formula for implied volatility

Masaaki Fukasawa

We derive a first-order representation of Black-Scholes implied variance in a continuous local martingale model. Total implied variance is the conditional expectation of the quadratic variation of the log price given its terminal value, up to a smaller-order term, for bounded standardized log-strikes. The framework incorporates small volatility-of-volatility, fast mean-reverting, and short-maturity asymptotics.
arXiv abstractPDF

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