Implementation of Local Volatility in Piterbarg’s Framework

Alexis Levendis () and Pierre Venter
Additional contact information
Alexis Levendis: University of Johannesburg
Pierre Venter: University of Johannesburg

Chapter Chapter 33 in Advances in Cross-Section Data Methods in Applied Economic Research, 2020, pp 507-521 from Springer

Abstract: Abstract The stock market crash of 1987 proved to be a major turning point in financial markets as the Black–Scholes model assumption of constantLevendis, Alexis volatility was violated. A new phenomena known as the “volatility smile” were observed post the crisis, and this has been one focus area of quantitative finance researchers over the past coupleVenter, Pierre of decades. Almost 20 years after the crash now known as “Black Monday”, the 2007 global financial crisis occurred which showed that numerous other factors need to be considered when pricing derivatives. Collateral, for instance, is considered by Piterbarg. In this paper, we present a local volatility model used to price arithmetic Asian call options in the Piterbarg framework.

Keywords: Interpolation; Local Volatility; Monte Carlo; Collateral (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:prbchp:978-3-030-38253-7_33

Ordering information: This item can be ordered from
http://www.springer.com/9783030382537

DOI: 10.1007/978-3-030-38253-7_33

Access Statistics for this chapter

More chapters in Springer Proceedings in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().