Convergence of Heston to SVI
Quantitative Finance, Vol. 11, No. 8, pp. 1129-1132, 2011
5 Pages Posted: 19 Feb 2010 Last revised: 31 Jul 2011
Date Written: February 18, 2010
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.
Keywords: SVI, Heston, Implied Volatility, Asymptotics, Calibration
JEL Classification: G12, G13, C60, C63
Suggested Citation: Suggested Citation