Wel, Michel van der; Ozturk, Sait R.; Dijk, Dick van - School of Economics and Management, University of Aarhus - 2015
The implied volatility surface is the collection of volatilities implied by option contracts for different strike … prices and time-to-maturity. We study factor models to capture the dynamics of this three-dimensional implied volatility … surface. Three model types are considered to examine desirable features for representing the surface and its dynamics: a …