announcements on the option smile. Design/methodology/approach – First, the authors estimate the implied volatility function in …

This paper develops two tests for parametric volatility function of a diffusion model based on Khmaladze (1981)’s … rate. The empirical results show that the commonly used CKLS volatility function of Chan et al. (1992) fits volatility … function poorly and none of the parametric interest rate models considered in the paper fit data well. …

@munichre.com 1 Keywords: Benchmark approach, fair pricing, GMDB, growth optimal portfolio, lapsation, local volatility function … market price of risk. Note that we suppose that the local volatility function σ : [0,T]×(0,∞) → (0,∞) is such that a unique …

This paper studies a class of one-factor local volatility function models for stock indices under a benckmark approach … probability measure. The real world transitin densities for the index and the underlying local volatility function can be … variance model and a version of the minimal market model are discussed together with a smoothed local volatility function that …

-factor local volatility function models for stock indices under a benchmark approach. It is assumed that the dynamics for a large …, the Dupire formula for the underlying local volatility function is recovered without assuming the existence of an … minimal market model are discussed as specific examples together with a smoothed local volatility function model that fits a …