Local Volatility and Dupire’s Equation

Andrey Itkin ()

Chapter 1 in Fitting Local Volatility:Analytic and Numerical Approaches in Black-Scholes and Local Variance Gamma Models, 2020, pp 3-12 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Local volatility model was invented around 1994 in [Dupire (1994)] for the continuous case and [Derman and Kani (1994a)] for the discrete case in response to the following problem…

Keywords: Local Volatility; Stochastic Clock; Geometric Process; Gamma Distribution; Piecewise Linear Volatility; Variance Gamma Process; Closed Form Solution; Fast Calibration; No-Arbitrage (search for similar items in EconPapers)
JEL-codes: C02 C6 C63 (search for similar items in EconPapers)
Date: 2020
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