Calibrating Option Pricing Models with Heuristics

Manfred Gilli () and Enrico Schumann

No 30, Working Papers from COMISEF

Abstract: Calibrating option pricing models to market prices often leads to optimisation problems to which standard methods (like such based on gradients) cannot be applied. We investigate two models: Heston’s stochastic volatility model, and Bates’s model which also includes jumps. We discuss how to price options under these models, and how to calibrate the parameters of the models with heuristic techniques.

Pages: 39 pages
Date: 2010-03-08
New Economics Papers: this item is included in nep-cmp and nep-ore
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Citations: View citations in EconPapers (11)

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