The Simulation of the Implied Distribution and Other Smile Consistent Stochastic Volatility Models: An Overview

  • George Skiadopoulos
Part of the Applied Optimization book series (APOP, volume 70)


This review paper focuses on the smile-consistent stochastic volatility models. Smile-consistent stochastic volatility models take the European options’ market prices as given, and they try to explain the stochastic evolution of implied volatilities over time across strikes and maturities. The main ideas behind the models by Derman and Kani (1998), Ledoit and Santa-Clara (1999), and Britten-Jones and Neuberger (1999) are highlighted. In addition, the concept and the applications of a new methodology for smile-consistent stochastic volatility pricing, that of the simulation of the implied distribution, are discussed. The simulation model by Skiadopoulos and Hodges (2001) is explained.

JEL Classification:G13.


Supply Chain Probability Density Function Asset Price Option Price Stochastic Volatility 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Science+Business Media Dordrecht 2002

Authors and Affiliations

  • George Skiadopoulos
    • 1
    • 2
  1. 1.Financial Options Research CentreUniversity of WarwickUK
  2. 2.Financial Engineering Research Centre. Department of Decision SciencesAthens University of Economics and BusinessGreece

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