This paper reviews a microscopic model of basic electron-hole pair exc
itation processes in strongly confined semiconductor quantum dots (QD)
and their influence on the optical QD properties. The effects of vale
nce band mixing, Coulomb interaction, and surface polarization are tak
en into account. The exciton and biexciton wave functions and energies
are obtained using a numerical diagonalization method. The computed o
ptical spectra, such as absorption, gain, pump-probe, and two-photon a
bsorption, agree well with experiments.