We suggest a semi-nonparametric estimator for the entire call price surface based on a tensor-product B-spline. To enforce no-arbitrage constraints in strike and calendar dimensions we establish sufficient no-arbitrage conditions on the control net of the tensor product (TP) B-spline. Since...

The paper studies estimation of implied volatility and the impact of the choice of the corresponding risk-free rate proxy. We suggest to analyze the implied volatility and the risk-free rate proxy inferred in conjunction from the observed option prices. We formulate and solve an overdefined...

This paper suggests a method of estimation of the implied volatility smile uncertainty of the observed options prices due to future risk-free rate uncertainty. The purpose is to quantify the range of uncertainty under different scenarios.We consider the setting where both the implied volatility...

The pricing accuracy and pricing performance of local volatility models crucially depends on absence of arbitrage in the implied volatility surface: an input implied volatility surface that is not arbitrage-free invariably results in negative transition probabilities and/ or negative local...

The pricing accuracy and pricing performance of local volatility models crucially depends on absence of arbitrage in the implied volatility surface: an input implied volatility surface that is not arbitrage-free invariably results in negative transition probabilities and/ or negative local...