Convex regularization of local volatility models from option prices: convergence analysis and rates

DOI10.1016/j.na.2011.10.037zbMath1263.47086OpenAlexW2015230180MaRDI QIDQ412709

Otmar Scherzer, Jorge P. Zubelli, Adriano De Cezaro

Publication date: 4 May 2012

Published in: Nonlinear Analysis. Theory, Methods \& Applications. Series A: Theory and Methods (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.na.2011.10.037

zbMATH Keywords

convergence ratesconvex risk measuresconvex regularizationlocal volatility surface identificationsource condition interpretation

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24) Financial applications of other theories (91G80) Applications of operator theory in optimization, convex analysis, mathematical programming, economics (47N10) Numerical methods for inverse problems for initial value and initial-boundary value problems involving PDEs (65M32) Linear operators and ill-posed problems, regularization (47A52)

Related Items

Modeling and implementation of local volatility surfaces in Bayesian framework, Regularization for the inverse problem of finding the purely time-dependent volatility, How should a local regime-switching model be calibrated?, Stable reconstruction of the volatility in a regime-switching local-volatility model, Mathematical Modeling and Georeferenced Forecasting for the COVID-19 at the State of RS, Brazil, Minimal Kullback–Leibler Divergence for Constrained Lévy–Itô Processes, The calibration of stochastic local-volatility models: an inverse problem perspective, CONVEX REGULARIZATION OF LOCAL VOLATILITY ESTIMATION, A connection between uniqueness of minimizers in Tikhonov-type regularization and Morozov-like discrepancy principles, Data driven recovery of local volatility surfaces, Simultaneous identification of volatility and interest rate functions -- a two-parameter regularization approach, On the choice of the Tikhonov regularization parameter and the discretization level: a discrepancy-based strategy

Cites Work

• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• Unnamed Item
• The Pricing of Options and Corporate Liabilities
• Variational methods in imaging
• Risk capital allocation by coherent risk measures based on one-sided moments.
• Convex measures of risk and trading constraints
• Applications of Malliavin calculus to Monte Carlo methods in finance
• Coherent Measures of Risk
• Sparse regularization with l ^q penalty term
• Joint additive Kullback–Leibler residual minimization and regularization for linear inverse problems
• Approximate source conditions for nonlinear ill-posed problems—chances and limitations
• Optimization and nonsmooth analysis
• Convergence of Best Entropy Estimates
• The inverse problem of option pricing
• Calibration of the Local Volatility in a Generalized Black--Scholes Model Using Tikhonov Regularization
• On the nature of ill-posedness of an inverse problem arising in option pricing
• Calibrating volatility surfaces via relative-entropy minimization
• On Maximum Entropy Regularization for a Specific Inverse Problem of Option Pricing
• Convergence rates of convex variational regularization
• Calibration of the local volatility in a trinomial tree using Tikhonov regularization
• A convergence rates result for Tikhonov regularization in Banach spaces with non-smooth operators
• Unifying Divergence Minimization and Statistical Inference Via Convex Duality
• Tikhonov regularization applied to the inverse problem of option pricing: convergence analysis and rates
• Error estimates for non-quadratic regularization and the relation to enhancement
• On decoupling of volatility smile and term structure in inverse option pricing
• Sufficiency and Exponential Families for Discrete Sample Spaces
• Regularization of ill-posed problems in Banach spaces: convergence rates
• Inverse problems for partial differential equations
• Risk and asset allocation.