Several new tests are proposed for examining the adequacy of a family of parametric models against large nonparametric alternatives. These tests formally check if the bias vector of residuals from ...

We present a non-parametric method for calibrating jump–diffusion and, more generally, exponential Lévy models to a finite set of observed option prices. We show that the usual formulations of the ...

where y i is the ith observed response value, x i is the ith vector of explanatory values, and 's are uncorrelated random variables with zero mean and a common variance. If the form of the regression ...

We propose a nonparametric local volatility Cheyette model and apply it to pricing interest rate swaptions. Concretely, given market prices of swaptions, we show how to construct a unique diffusion ...

SAS/INSIGHT software provides nonparametric curve-fitting estimates from smoothing spline, kernel, loess, and fixed bandwidth local polynomial estimators that are alternatives to fitting polynomials.