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612-822-4611
Fitting the implied volatility surface

Fitting the implied volatility surface

Paperback

Accounting

ISBN10: 3639720504
ISBN13: 9783639720501
Publisher: Blues Kids Of Amer
Published: Sep 29 2014
Pages: 136
Weight: 0.46
Height: 0.32 Width: 6.00 Depth: 9.00
Language: English
In the context of exotic derivatives, arbitrage-free implied volatility surfaces are a crucial ingredient to sophisticated pricing routines. We use a non-linear optimization technique to fit an arbitrage-free implied volatility surface efficiently to market data. The fitting procedure is tailor-made for any analytic parametrization of the single volatility skews. We carry out this approach for a certain parametrization by implementing an Interior-Point method, discuss its shortcomings, potentials, as well as specific smoothing techniques. Besides all the theory, we give various fitting details and examples by using real market data.

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Accounting