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| Author: | Kahalé, N. |
| Title: | An arbitrage-free interpolation of volatilities |
| Journal: | Risk
2004 : MAY, VOL. 17:5, p. 102-106 |
| Index terms: | derivative securities financial models pricing stock options |
| Language: | eng |
| Abstract: | This article discusses the pricing of exotic options in a way consistent with the smile. The writer proposes a method which provides an excellent fit to the smile of the local volatilities model, a standard extension of the Black & Scholes model. |
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