Cross-currency smile calibration

Gabriel Turinici () and Marc Laillat
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Gabriel Turinici: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Marc Laillat: Adfin Analytics team - Thsomson Reuters

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Abstract: We document the numerical aspects of the calibration of cross-currency options on the local volatility framework. We consider the partial differential equation satisfied by the price of the cross-currency option and see that the most important specifications to set are the boundary conditions. We explain how these conditions can be approximated and test the validity of the approximation on simple cases.

Keywords: cross-currency options; calibration; local volatility; implied volatility; Dupire formula; adjoint; boundary conditions (search for similar items in EconPapers)
Date: 2009-02-16
Note: View the original document on HAL open archive server: https://hal.science/hal-00351016v1
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Published in Modelling, Identification and Control, Feb 2009, Innsbruck, Austria. pp.130-132

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00351016

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