statistical methodology known as Adaptive Weights Smoothing (AWS). The methodology is used both for the study of the individual …

transitionprobabilities and/ or negative local volatilities, and ultimately, into mispricings. Thecommon smoothing algorithms of the implied … volatility surface cannot guarantee the absence arbitrage. Here, we propose an approach for smoothing the implied volatility …-founded theory of natural smoothing splines under suitable shape constraints. Unlike other methods, our approach also works when …