Choice of the performance metric is a crucial part of empirical assessment of option pricing model performance and benchmarking, mainly because the outcome is subject to change based on the metric. Usage of performance metrics in the empirical option pricing literature are examined and their...

Parametric volatility models can be seen as the result of some form of dimensionality reduction obtained by projecting the volatility surface into a basis of risk factors. Examples include polynomial models and stochastic volatility models having an explicit expression for the smile, such as the...

We examine whether the dynamics of the implied volatility surface of individual equity options contains exploitable predictability patterns. Predictability in implied volatilities is expected due to the learning behavior of agents in option markets. In particular, we explore the possibility that...