Spectral calibration of exponential Lévy Models [1]

Denis Belomestny and Markus Reiss

No 2006-034, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: We investigate the problem of calibrating an exponential Lévy model based on market prices of vanilla options. We show that this inverse problem is in general severely ill-posed and we derive exact minimax rates of convergence. The estimation procedure we propose is based on the explicit inversion of option price formula in the spectral domain and a cut-off scheme for high frequencies as regularisation.

Keywords: European option; jump diffusion; minimax rates; severely ill-posed; nonlinear inverse problem; spectral cut-off (search for similar items in EconPapers)
JEL-codes: C14 G13 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/25125/1/513076360.PDF (application/pdf)

Related works:
Journal Article: Spectral calibration of exponential Lévy models (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2006-034

Access Statistics for this paper

More papers in SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().