Calibration of local volatility using the local and implied instantaneous variance

Gabriel Turinici

Journal of Computational Finance

Abstract: ABSTRACT 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 approach. The procedure performs well on benchmarks from the literature and on foreign exchange data.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-computational-fina ... stantaneous-variance (text/html)

Related works:
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:rsk:journ0:2160421

Access Statistics for this article

More articles in Journal of Computational Finance from Journal of Computational Finance
Bibliographic data for series maintained by Thomas Paine ().