Bias-reduced nonparametric local volatility: Stable numerical method without building the continuous implied volatility surface

Junhyun Cho, Wooyeol Jeong, Donghee Yang and Sungchul Lee

Mathematics and Computers in Simulation (MATCOM), 2026, vol. 246, issue C, 229-246

Abstract: We propose a stable numerical method for constructing a bias-reduced nonparametric local volatility surface without relying on a pre-constructed continuous implied volatility surface.

Keywords: Local volatility surface; Dupire equation; Feynman–Kac formula; Nonparametric model; Numerical techniques (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:246:y:2026:i:c:p:229-246

DOI: 10.1016/j.matcom.2026.01.030

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