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Can the implied volatility surface move by parallel shifts?

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Abstract

This note explores the analogy between the dynamics of the interest rate term structure and the implied volatility surface of a stock. In particular, we prove an impossibility theorem conjectured by Steve Ross.

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Authors and Affiliations

  1. Statistical Laboratory, University of Cambridge, Centre for Mathematical Sciences, Wilberforce Road, Cambridge, CB3 0WB, UK

    L. C. G. Rogers & M. R. Tehranchi

Authors
  1. L. C. G. Rogers
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  2. M. R. Tehranchi
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Correspondence to L. C. G. Rogers.

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Rogers, L.C.G., Tehranchi, M.R. Can the implied volatility surface move by parallel shifts?. Finance Stoch 14, 235–248 (2010). https://doi.org/10.1007/s00780-008-0081-9

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  • DOI: https://doi.org/10.1007/s00780-008-0081-9

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