eduzhai > Physical Sciences > Physics Sciences >

Nonparametric Model Calibration for Derivatives

  • Save

... pages left unread,continue reading

Document pages: 26 pages

Abstract: Consistently fitting vanilla option surface is an important issue in derivative modelling. In this paper, we consider three different models: local and stochastic volatility, local correlation, hybrid local volatility with stochastic rates, and address their exact, nonparametric calibration. This calibration process requires solving a nonlinear partial integro-differential equation. A modified alternating direction implicit algorithm is used, and its theoretical and numerical analysis is performed.

Please select stars to rate!


0 comments Sign in to leave a comment.

    Data loading, please wait...