A copy of this work was available on the public web and has been preserved in the Wayback Machine. The capture dates from 2011; you can also visit the original URL.
The file type is application/pdf
.
Calibration of local volatility using the local and implied instantaneous variance
2009
Journal of Computational Finance
We document the calibration of the local volatility in terms of local and implied instantaneous variances; we first explore the theoretical properties of the method for a particular class of volatilities. We confirm the theoretical results through a numerical procedure which uses a Gauss-Newton style approximation of the Hessian in the framework of a sequential quadratic programming (SQP) approach. The procedure performs well on benchmarks from the literature and on FOREX data.
doi:10.21314/jcf.2009.195
fatcat:qhyxwocuqbdorfufm4nff4htvy