BRODY, DORJE C.; CONSTANTINOU, IRENE C.; MEISTER, … - In: International Journal of Theoretical and Applied … 10 (2007) 08, pp. 1323-1337
discount function determines the forward rates for the vanilla option portfolio. The dynamics associated with these quantities … rates. The formulation based on forward rates for options extends the approach based on modeling the implied volatility … example that the implied volatility smile has the effect of making the option forward rates homogeneous across different …