Applications of Fourier Transform to Smile Modeling: Theory and Implementation

This book addresses the applications of Fourier transform to smile modeling. Smile effect is used generically by—nancial engineers and risk managers to refer to the inconsistences of quoted implied volatilities invfinancial markets, or more mat- matically, to the leptokurtic distributions of financial assets and indices. Therefore, a sound modeling of smile effect is the central challenge in quantitative finance. Since more than one decade, Fourier transform has triggered a technical revolu...