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Article Dans Une Revue The Journal of Computational Finance Année : 2009

Calibration of local volatility using the local and implied instantaneous variance

Résumé

We document the calibration of the local volatility in terms of local and implied instantaneous variances; we first explore the theoretical properties of the method for a particular class of volatilities. We confirm the theoretical results through a numerical procedure which uses a Gauss-Newton style approximation of the Hessian in the framework of a sequential quadratic programming (SQP) approach. The procedure performs well on benchmarks from the literature and on FOREX data.
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Dates et versions

hal-00338114 , version 1 (11-11-2008)
hal-00338114 , version 2 (21-12-2008)

Identifiants

  • HAL Id : hal-00338114 , version 2

Citer

Gabriel Turinici. Calibration of local volatility using the local and implied instantaneous variance. The Journal of Computational Finance, 2009, 13 (2), pp.1--18. ⟨hal-00338114v2⟩
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