Short communication: Beyond surrogate modeling: learning the local volatility via shape constraints

DOI10.1137/20M1381538MaRDI QIDQ5162840zbMATH OpenOpenAlexFDO

Authors Marc Chataigner, Areski Cousin, Stéphane Crépey, Matthew F. Dixon, Djibril Gueye

Publication date 5 November 2021

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1137/20m1381538

zbMATH Keywords

Gaussian processeslocal volatilityneural networksno-arbitrageoption pricing

Mathematics Subject Classification ID

Nonparametric regression and quantile regression (62G08) Learning and adaptive systems in artificial intelligence (68T05) Derivative securities (option pricing, hedging, etc.) (91G20)

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Cites work

• Arbitrage-free SVI volatility surfaces
• Gaussian process emulators for computer experiments with inequality constraints
• Kriging of financial term-structures
• Machine learning. A probabilistic perspective
• Maximum likelihood estimation for Gaussian processes under inequality constraints

Cited in

(10)

• Option valuation under no-arbitrage constraints with neural networks
• Fitting local volatility. Analytic and numerical approaches in Black-Scholes and local variance gamma models
• Deep learning volatility: a deep neural network perspective on pricing and calibration in (rough) volatility models
• Krighedge: Gaussian process surrogates for delta hedging
• Arbitrage-Free Implied Volatility Surface Generation with Variational Autoencoders
• Arbitrage-Free Neural-SDE Market Models
• A two-step framework for arbitrage-free prediction of the implied volatility surface
• Bayesian analysis of constrained Gaussian processes
• Equivalence between constrained optimal smoothing and Bayesian estimation
• Large-scale constrained Gaussian processes for shape-restricted function estimation

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Uses Software

• PMTK

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