In modern derivatives trading, Black-Scholes theory is only a starting point. Asset volatilities are not constant, but change with market conditions. Large price moves are associated with periods of market turbulence and this leads to a smile shaped curve of the volatility implied from market prices.

Smile Pricing Explained provides a clear and thorough explanation of the concepts of smile modelling that are at the forefront of modern derivatives pricing. The key models used in practice are covered, together with numerical techniques and calibration.

Dr Austing guides the reader from...