Work

Short-maturity skew stickiness ratio under local volatility

Year: 2026

Type: preprint

Abstract: We prove that the skew stickiness ratio converges to two at short maturity under local volatility models. This appears to be the first rigorous proof of this limit for a general time-dependent local volatility function. As a by-product, we strengthen the one-half rule of the implied volatility skew by removing uniform ellipticity and global bounds on spatial derivatives of order at least two. The proof uses a first-order Watanabe expansion.

Source: arXiv (Cornell University)

DOI: 10.48550/arxiv.2609.11586

Author: Fukasawa, Masaaki

Institution: The University of Osaka

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W7212226649

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