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Feb 26

Modelling the implied volatility surface

Posted by abiao at 18:06 | Code » Other | Comments(0) | Reads(11596)
The volatility surface implied by option prices presents a structure that changes over
time. The aim of this paper is to present a framework to model the implied volatility
of the FTSE options in real time, and to present a prototype application that
implements this framework. The authors adapt the parametric models presented in Dumas et
al (1998) to estimate the surfaces across moneyness instead of across strikes, they
discuss how this framework can be used in applications of option pricing and risk
management
.

Paper and attached matlab/VB/mathematica codes: http://www.amadeo.name/working_papers/volatility_surface_may04.pdf


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