The aim of this article is to address the methodology behind de-arbitraging a realistic volatility surface and stressing it without adding arbitrages. We derive from basic principles the constraints which the changes on the strike and the tenor axis must satisfy in order to make a volatility...

We develop a framework for pricing multivariate European-style contingent claims in a discrete-time economy based on a multivariate transformed-gamma distribution. In our model, each transformed-gamma distributed underlying asset depends on two terms: a idiosyncratic term and a systematic term,...

We build on Fackler and King (1990) and propose a general calibration model for implied risk neutral densities. Our model allows for the joint calibration of a set of densities at different maturities and dates. The model is a Bayesian dynamic beta Markov random field which allows for possible...