Haas, Markus; Mittnik, Stefan; Mizrach, Bruce - Center for Financial Studies - 2005
Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that … explores two of them: extracting implied probability densities from option prices and
volatility modeling of the underlying … (1987), Hull and White
(1987), Stein and Stein (1991), and Heston (1993) allow volatility to change over time. A related …