Given bid-offer quotes for a set of listed vanilla options, a fundamental need of option market makers is to interpolate and extrapolate the available quotes to a full arbitrage-free surface. We propose a methodology which directly controls the trade-off between smoothness and bid-offer...

A new method to retrieve the risk-neutral probability measure from observed option prices is developed and a closed form pricing formula for European options is obtained by employing a modified Gram-Charlier series expansion, known as the Gauss-Hermite expansion. This expansion converges for...

Following a trend of sustained and accelerated growth, the VIX futures and options market has become a closely followed, active and liquid market. The standard stochastic volatility models—which focus on the modeling of instantaneous variance—are unable to fit the entire term structure of...

<title>Abstract</title>Given bid-offer quotes for a set of listed vanilla options, a fundamental need of option market makers is to interpolate and extrapolate the available quotes to a full arbitrage-free surface. We propose a methodology which directly controls the trade-off between smoothness and bid-offer...

We present a new and general technique for obtaining closed-form expansions for prices of options in the Heston model, in terms of Black-Scholes prices and Black-Scholes Greeks up to arbitrary order. We then apply the technique to solve, in detail, the cases for the second-order and third-order...

We study the pricing of options on realized variance in a general class of Log-OU (Ornstein--Ühlenbeck) stochastic volatility models. The class includes several important models proposed in the literature. Having as common feature the log-normal law of instantaneous variance, the application of...

In this paper we study the pricing and hedging of options on realized variance in the 3/2 non-affine stochastic volatility model by developing efficient transform-based pricing methods. This non-affine model gives prices of options on realized variance that allow upward-sloping implied...