Reduced-order models for the implied variance under local volatility

DOI10.1142/S0219024914500538MaRDI QIDQ2939925zbMATH OpenOpenAlexFDO

Authors Ekkehard W. Sachs, Marina Schneider

Publication date 23 January 2015

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

Full work available at URL https://doi.org/10.1142/s0219024914500538

zbMATH Keywords

discrete empirical interpolation methodimplied volatilitylocal volatility modelsmodel order reductionpartial differential equationsproper orthogonal decomposition

Mathematics Subject Classification ID

Factor analysis and principal components; correspondence analysis (62H25) Numerical interpolation (65D05) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

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Cites work

• A New Look at Proper Orthogonal Decomposition
• A reduced basis for option pricing
• An `empirical interpolation' method: Application to efficient reduced-basis discretization of partial differential equations
• Asymptotics for exponential Lévy processes and their volatility smile: survey and new results
• Asymptotics of implied volatility in local volatility models
• Calibration of local volatility using the local and implied instantaneous variance
• Calibration of options on a reduced basis
• Computational Methods for Option Pricing
• Efficiency of a POD-based reduced second-order adjoint model in 4D-Var data assimilation
• Equivalent Black volatilities
• Galerkin proper orthogonal decomposition methods for parabolic problems
• Mimicking the one-dimensional marginal distributions of processes having an Ito differential
• Nonlinear model reduction via discrete empirical interpolation
• POD Galerkin schemes for nonlinear elliptic-parabolic systems
• POD-Galerkin approximations in PDE-constrained optimization
• POD/DEIM nonlinear model order reduction of an ADI implicit shallow water equations model
• Semiparametric modeling of implied volatility.
• Sequential quadratic programming method for volatility estimation in option pricing
• The exact smile of certain local volatility models
• The heat-kernel most-likely-path approximation

Cited in

(5)

• Adaptive trust-region POD methods in PIDE-constrained optimization
• Forward implied volatility expansion in time-dependent local volatility models
• Implied Volatility from Local Volatility: A Path Integral Approach
• Variance reduction approach for the volatility over a finite-time horizon
• Stochastic local volatility models and the Wei-Norman factorization method

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