One Other Option Pricing Scheme

We present a distinctive approach to parameterizing the risk neutral distribution.

Using parsimonious and interpretable parameters, the model provides direct and localized control over the shape of the implied volatility curve.

It captures a wide variety of shapes, including those with local concavity.

Empirical results demonstrate accurate calibration across a quarter million curves from a two-year Standard and Poor's 500 index option dataset.

The fitted parameters exhibit stable patterns across tenors, enabling term structure interpolation and dynamic process construction without static arbitrage.