A new well-posed algorithm to recover implied local volatility

Lishang Jiang, Qihong Chen, Lijun Wang and Jin Zhang

Quantitative Finance, 2003, vol. 3, issue 6, 451-457

Abstract: This paper presents a new algorithm to calibrate the option pricing model, i.e. the algorithm that recovers the implied local volatility function from market option prices in the optimal control framework. A unique optimal control is shown to exist. Our algorithm is well-posed. Our numerical experiments show that, with the help of the techniques developed in the field of optimal control, the local volatility function is recovered very well.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1088/1469-7688/3/6/304 (text/html)
Access to full text is restricted to subscribers.

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:taf:quantf:v:3:y:2003:i:6:p:451-457

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1088/1469-7688/3/6/304

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().