ABSTRACT
In Chapter 8 we have characterized stochastic volatility smiles and how they are related to the model’s specication: where do skew and curvature come from and how we can compute them approximately?
Then in Chapter 9 we have focused on dynamical aspects of smiles in stochastic volatility models: how do ATMF volatilities move in these models? From the bare knowledge of the smile generated by a stochastic volatility model can we say anything about the joint dynamics of spot and implied volatilities in the model?
