Enhanced Calibration of Spread Option Simulation Pricing

Shuming Zhang and Traian A. Pirvu ()
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Shuming Zhang: Independent Researcher, Toronto, ON M5V 0P5, Canada
Traian A. Pirvu: Department of Mathematics and Statistics, McMaster University, 1280 Main Street West, Hamilton, ON L8S 4K1, Canada

Risks, 2025, vol. 13, issue 7, 1-15

Abstract: This paper enhances the calibration procedure for pricing spread options with liquidity risk. The novelty is the use of Chebyshev interpolation to fit the prices.Numerical experiments reveal that the calibrated parameters are close to the ones obtained by a previous work. However, the fit obtained by this paper is superior as shown by our plots.

Keywords: derivatives; risk management; speculations; liquidity risk; calibration (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:13:y:2025:i:7:p:140-:d:1706517

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