Abstract: In this paper, we investigate the asymptotic behavior of the Bachelier implied volatility tails, extending the large-strike results established for the Black–Scholes implied volatility. By exploiting the theory of regular variation, we derive explicit expressions for the Bachelier implied volatility in the wings of the smile, directly linking them to the tail decay of the underlying returns’ distribution. Furthermore, we establish a rigorous connection between the analyticity strip of the characteristic function and the asymptotic slope of the volatility smile. Moreover, we show that if the implied variance grows linearly for large absolute moneyness degree, the underlying returns’ distribution must exhibit exponential tail decay, and the corresponding characteristic function is analytic in a horizontal strip of the complex plane. These findings characterize valid models based solely on the observable asymptotic behavior of the smile.
Ott
30
2026
