TANGENT MODELS AS A MATHEMATICAL FRAMEWORK FOR DYNAMIC CALIBRATION

DOI10.1142/S0219024911006280MaRDI QIDQ3086258zbMATH OpenOpenAlexFDO

Authors Sergey Nadtochiy, René Carmona

Publication date 30 March 2011

Published in International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1142/s0219024911006280

zbMATH Keywords

local volatilityimplied volatilityHeath-Jarrow-Morton approachmarket modelstangent Lévy models

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Derivative securities (option pricing, hedging, etc.) (91G20) Financial applications of other theories (91G80)

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Cites work

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• Gaussian measures in Banach spaces
• Local volatility dynamic models
• Mimicking the one-dimensional marginal distributions of processes having an Ito differential
• Option pricing when underlying stock returns are discontinuous
• Paris-Princeton lectures on mathematical finance 2004.
• Risk-neutral compatibility with option prices
• Stochastic Implied Trees: Arbitrage Pricing with Stochastic Term and Strike Structure of Volatility
• TERM STRUCTURES OF IMPLIED VOLATILITIES: ABSENCE OF ARBITRAGE AND EXISTENCE RESULTS

Cited in

(8)

• CONDITIONAL DENSITY MODELS FOR ASSET PRICING
• Model uncertainty, recalibration, and the emergence of delta-vega hedging
• Tangent Lévy market models
• Simulation of implied volatility surfaces via tangent Lévy models
• On the calibration of local jump-diffusion asset price models
• On a Heath-Jarrow-Morton approach for stock options
• ROBUST TRADING OF IMPLIED SKEW
• Discrete time term structure theory and consistent recalibration models

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