Recover implied volatility of underlying asset from European option price

DOI10.1515/JIIP.2009.031zbMath1167.91372MaRDI QIDQ5191069

Lu Lu, Lei Yi

Publication date: 28 July 2009

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.2009.031

Mathematics Subject Classification ID

62P05: Applications of statistics to actuarial sciences and financial mathematics

91G60: Numerical methods (including Monte Carlo methods)

65R20: Numerical methods for integral equations

91G20: Derivative securities (option pricing, hedging, etc.)

65R32: Numerical methods for inverse problems for integral equations

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Calibration of the purely T-dependent Black–Scholes implied volatility, Regularization for the inverse problem of finding the purely time-dependent volatility, Identifying the implied volatility using the total variation regularization, An inverse volatility problem of financial products linked with gold price, Recovery of the local volatility function using regularization and a gradient projection method

Cites Work

• The Pricing of Options and Corporate Liabilities
• Uniqueness, stability and numerical methods for the inverse problem that arises in financial markets
• The inverse problem of option pricing
• On the nature of ill-posedness of an inverse problem arising in option pricing
• Tikhonov regularization applied to the inverse problem of option pricing: convergence analysis and rates
• On decoupling of volatility smile and term structure in inverse option pricing