[R-sig-finance] Stochastic volatility

[Krishna Kumar]

>I have not yet seen the application of the Kalman filter (and the particle 
>filter) to option pricing. This sounds like a very interesting approach! If 
>anyone knows about such work, please give me a link!
>
>  
>
Another paper that might be of interest is this by Alireza (reza) et.al
http://www.wilmott.com/pdfs/050511_javaheri.pdf
the kalman filter is a prefered approach for computing time-varying 
betas in some banks :-)