The purpose of this study is to model implied volatility surfaces and identify risk factors that account for most of … the randomness in the volatility surfaces. The approach is similar to that of the Dumas, Fleming and Whaley (DFW) (1998 … smooth implied volatility surfaces. Next, principal component analysis is applied to the implied volatility surfaces to …

the slope and volatility of LIBOR rates, and mortgage markets activities have strong impacts on the shape of the forward …, respectively. Our results provide nonparametric evidence of unspanned stochastic volatility and suggest that the unspanned factors …

This paper documents law of one price violations in equity volatility markets. While tightly linked by no …

, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility … known as "volatility smile". They provide a discrete approximation to the continuous risk neutral process for the underlying … Barle and Cakici (BC). After the formation of IBT we can estimate the implied local volatility and the state price density …

We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high …-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by … competing time-varying (i.e. GARCH-type) and stochastic volatility pricing models. The pricing improvement can be ascribed to …

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …

Many studies have documented that daily realized volatility estimates based on intraday returns provide volatility … that use daily returns as well as realized volatility. We derive convenient closed-form option valuation formulas and we … assess the option valuation properties using S&P500 return and option data. We find that realized volatility reduces the …