We examine the empirical performance of a spline-based, local volatility surface for the period 2000–2005. Our findings indicate that the proposed model outperforms the best-performing implied volatility–based model reported in the current literature for European-style S&P 500 Index options....

We examine the empirical performance of several stochastic local volatility models that are the extensions of the Heston stochastic volatility model. Our results indicate that the stochastic volatility model with quadratic local volatility significantly outperforms the stochastic volatility...