Many methods of computational statistics lead to matrix-algebra or numerical- mathematics problems. For example, the least squares method in linear regression reduces to solving a system of linear equations. The principal components method is based on finding eigenvalues and eigenvectors of a...

Implied trinomial trees (ITTs) present an analogous extension of trinomial trees proposed by Derman, Kani, and Chriss (1996). Like their binomial counterparts, they can fit the market volatility smile and actually converge to the same continuous limit as binomial trees. In addition, they allow...

Most dimension reduction methods based on nonparametric smoothing are highly sensitive to outliers and to data coming from heavy-tailed distributions. We show that the recently proposed methods by Xia et al. (2002) can be made robust in such a way that preserves all advantages of the original...