Calibration of the Bass Local Volatility model
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2023
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| _version_ | 1866916869618794496 |
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| author | Acciaio, Beatrice Marini, Antonio Pammer, Gudmund |
| author_facet | Acciaio, Beatrice Marini, Antonio Pammer, Gudmund |
| contents | The Bass local volatility model introduced by Backhoff-Veraguas, Beiglböck, Huesmann, and Källblad is a Markov model perfectly calibrated to vanilla options at finitely many maturities, that approximates the Dupire local volatility model. Conze and Henry-Labordère show that its calibration can be achieved by solving a fixed-point equation. In this paper we complement the analysis and show existence and uniqueness of the solution to this equation, and that the fixed-point iteration scheme converges at a linear rate. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2311_14567 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | Calibration of the Bass Local Volatility model Acciaio, Beatrice Marini, Antonio Pammer, Gudmund Mathematical Finance Probability 60G44, 65J15, 91G30 The Bass local volatility model introduced by Backhoff-Veraguas, Beiglböck, Huesmann, and Källblad is a Markov model perfectly calibrated to vanilla options at finitely many maturities, that approximates the Dupire local volatility model. Conze and Henry-Labordère show that its calibration can be achieved by solving a fixed-point equation. In this paper we complement the analysis and show existence and uniqueness of the solution to this equation, and that the fixed-point iteration scheme converges at a linear rate. |
| title | Calibration of the Bass Local Volatility model |
| topic | Mathematical Finance Probability 60G44, 65J15, 91G30 |
| url | https://arxiv.org/abs/2311.14567 |