Calibrating local volatility in inverse option pricing using the Levenberg-Marquardt method

DOI10.1515/JIIP.2010.023MaRDI QIDQ2874459zbMATH OpenOpenAlexFDO

Authors A. Lakhal, Mohamed Majdi Lakhal, A. K. Louis

Publication date 30 January 2014

Published in Journal of Inverse and Ill-Posed Problems (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1515/jiip.2010.023

zbMATH Keywords

option pricingparameter identificationinverse problemsstochastic PDEcalibrating volatility

Mathematics Subject Classification ID

Numerical mathematical programming methods (65K05) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Numerical computation of solutions to systems of equations (65H10) Inverse problems for PDEs (35R30)

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Cites work

• A Second Degree Method for Nonlinear Inverse Problems
• A regularizing Levenberg - Marquardt scheme, with applications to inverse groundwater filtration problems
• Calibration of the Local Volatility in a Generalized Black--Scholes Model Using Tikhonov Regularization
• Calibration of the local volatility in a trinomial tree using Tikhonov regularization
• Inexact Newton Regularization Using Conjugate Gradients as Inner Iteration
• Iteration methods for convexly constrained ill-posed problems in hilbert space
• On decoupling of volatility smile and term structure in inverse option pricing
• On the nature of ill-posedness of an inverse problem arising in option pricing
• On the regularization of projection methods for solving ill-posed problems
• Some Newton-type methods for the regularization of nonlinear ill-posed problems
• The pricing of options and corporate liabilities
• Tikhonov regularization applied to the inverse problem of option pricing: convergence analysis and rates
• Uniqueness, stability and numerical methods for the inverse problem that arises in financial markets

Cited in

(6)

• Algorithm for determining the volatility function in the Black-Scholes model
• The calibration of stochastic local-volatility models: an inverse problem perspective
• On some inverse problems for the Black-Scholes equation
• A linearization-based solution to an inverse problem in financial markets
• The tangential cone condition for the iterative calibration of local volatility surfaces
• VOLATILITY SMILE BY MULTILEVEL LEAST SQUARE

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