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Constrained Smoothing of Noisy Data Using Splines in Tension

✍ Scribed by Teanby, Nicholas A.


Publisher
Springer
Year
2007
Tongue
English
Weight
437 KB
Volume
39
Category
Article
ISSN
0020-5958

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We apply constrained smoothing B‐splines to the construction of arbitrage‐free implied volatilities and derived measures. The constrained smoothing B‐splines allows the imposition of the constraints of monotonicity and convexity given by the no‐arbitrage conditions in the pricing function. We illust