The volatility implied by observed market prices as a function of the strikeand time to maturity form an Implied … Volatility Surface (IV S). Practicalapplications require reducing the dimension and characterize its dynamicsthrough a small … investigating long range dependencein the factor loadings series. Our result reveals that shocks to volatility persistfor a very …

market model, whose volatility, interest rate process, and long-term trend are driven by an external stochastic factor …

The implied volatility of a European option as a function of strike price and time to maturity forms a volatility … semiparametric models approximate the implied volatility surface (IVS) in a finite dimensional function space,allowing for a low …

Implied volatility is one of the key issues in modern quantitative finance, since plain vanilla option prices contain … yield low dimensional representations of the implied volatility surface (IVS). We discussestimation issues of the model and …

A primary goal in modelling the implied volatility surface (IVS) for pricing andhedging aims at reducing complexity … approach, however, neglects the degenerated string structure of the implied volatility data and may result in a modelling bias … generalized vega-hedging strategy for exotic options that are priced in the local volatility framework. The generalized vega …

The pricing accuracy and pricing performance of local volatility models cruciallydepends on absence of arbitrage in the … implied volatility surface: an input impliedvolatility surface that is not arbitrage-free invariably results in negative … volatility surface cannot guarantee the absence arbitrage. Here, we propose an approach for smoothing the implied volatility …

implied volatilities (IV) plays an important role, since volatility is the crucial parameter in the Black-Scholes (BS) pricing … known as volatility smiles or smirks that contradict the assumption of constant volatility in the BS pricing model. On the …

option prices. But some of its assumptions, like constant volatility or log-normal distribution of asset prices,do not find … implied volatility surface. To overcome this problem Carr and Madan (1999) developed a fast method to compute option prices …

property of estimating homogeneous volatility in a short time interval. For DEM/USD exchange rate data and a German bank …