smoothed implied volatility smile methods. The changes resulting from randomly perturbing quoted prices by no more than a half … International Financial Futures and Options Exchange. The tests show that the smoothed implied volatility smile method dominates the …

This study compares the efficacy of Black–Scholes implied volatility (BSIV) with model-free implied volatility (MFIV …) in providing volatility forecasts for 13 North American, European, and Asian stock market indexes: S&P 500 (United States … Kingdom). In-sample volatility forecasts show that both BSIV and MFIV significantly improve the fit of a GJR-GARCH(1,1) model …

We introduce a new method to price American-style options on underlying investments governed by stochastic volatility … (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the … distributions of volatility, given observed data. By constructing statistics summarizing information about these conditional …

We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare … two-factor models. A second volatility component improves the option fit by 9% on average. Fat tails improve option fit by …