Introduction; The Implied Volatility Surface; Smile Consistent Volatility Models; Smoothing Techniques; Dimension-Reduced Modeling; Conclusion and Outlook
Summary
"This book fills a gap in the financial literature by bringing together both recent advances in the theory of implied volatility and refined semiparametric estimation strategies and dimension reduction methods for functional surfaces: the first part of the book is devoted to smile-consistent pricing approaches. The theory of implied and local volatility is presented concisely, and the vital smile-consistent modeling approaches such as implied trees, mixture diffusions, or stochastic implied volatility models are discussed in detail. The second part of the book familiarizes the reader with estimation techniques that are natural candidates to meet the challenges in implied volatility modeling, such as the rich functional structure of implied volatility surfaces: non- and semiparametric smoothing techniques." "The book introduces Nadaraya-Watson, local polynomial and least squares kernel smoothing, and dimension reduction methods such as common principal components, functional principal components models and dynamic semiparametric factor models. Most methods are illustrated with empirical investigations, simulations and figures."--Jacket
Bibliography
Includes bibliographical references (pages 207-220) and index
