This study evaluates two one‐factor, two two‐factor, and two three‐factor implied volatility functions in the HJM class, with the use of eurodollar futures options across both strike prices and maturities. The primary contributions of this article are (a) to propose and test three implied...

This study investigates the structure of the implied volatility smile, using the prices of equity options traded on the LIFFE. First, the slope of the implied volatility curve is significantly negative for both individual stocks and index options, and the slope is less negative for longer‐term...