Related papers: Filling the gaps smoothly

This article proposes a calibration framework for complex option pricing models that jointly fits market option prices and the term structure of variance. Calibrated models under the conventional objective function, the sum of squared…

In this paper, we study a semi-martingale optimal transport problem and its application to the calibration of Local-Stochastic Volatility (LSV) models. Rather than considering the classical constraints on marginal distributions at initial…

We develop a multi-factor stochastic volatility Libor model with displacement, where each individual forward Libor is driven by its own square-root stochastic volatility process. The main advantage of this approach is that, maturity-wise,…

Pricing and hedging exotic options using local stochastic volatility models drew a serious attention within the last decade, and nowadays became almost a standard approach to this problem. In this paper we show how this framework could be…

The Bass Local Volatility Model (Bass-LV), as studied in [Conze and Henry-Labordere, 2021], stands out for its ability to eliminate the need for interpolation between maturities. This offers a significant advantage over traditional LV…

In the context of a locally risk-minimizing approach, the problem of hedging defaultable claims and their Follmer-Schweizer decompositions are discussed in a structural model. This is done when the underlying process is a finite variation…

We apply convex regularization techniques to the problem of calibrating the local volatility surface model of Dupire taking into account the practical requirement of discrete grids and noisy data. Such requirements are the consequence of…

We introduce a Markov-functional approach to construct local volatility models that are calibrated to a discrete set of marginal distributions. The method is inspired by and extends the volatility interpolation of Bass (1983) and Conze and…

The paper deals with a comprehensive theory of mappings, whose local behavior can be described by means of linear subspaces, contained in the graphs of two (primal and dual) generalized derivatives. This class of mappings includes the…

In this work, we present a new approach to the construction of variational integrators. In the general case, the estimation of the action integral in a time interval $[q_k,q_{k+1}]$ is used to construct a symplectic map $(q_k,q_{k+1})\to…

We present a new methodology to analyze large classes of (classical and rough) stochastic volatility models, with special regard to short-time and small noise formulae for option prices. Our main tool is the theory of regularity structures,…

In this chapter, we consider volatility swap, variance swap and VIX future pricing under different stochastic volatility models and jump diffusion models which are commonly used in financial market. We use convexity correction approximation…

We analyze the VIX futures market with a focus on the exchange-traded notes written on such contracts, in particular we investigate the VXX notes tracking the short-end part of the futures term structure. Inspired by recent developments in…

Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models introduced by Taylor in the description of the log-returns of financial assets. The pricing and hedging of contingent products…

Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…

This paper presents how to apply the stochastic collocation technique to assets that can not move below a boundary. It shows that the polynomial collocation towards a lognormal distribution does not work well. Then, the potentials issues of…

We propose Monte Carlo calibration algorithms for three models: local volatility with stochastic interest rates, stochastic local volatility with deterministic interest rates, and finally stochastic local volatility with stochastic interest…

We obtain new closed-form pricing formulas for contingent claims when the asset follows a Dupire-type local volatility model. To obtain the formulas we use the Dyson-Taylor commutator method that we have recently developed in [5, 6, 8] for…

The structural default model of Lipton and Sepp, 2009 is generalized for a set of banks with mutual interbank liabilities whose assets are driven by correlated Levy processes with idiosyncratic and common components. The multi-dimensional…

For the first time in mathematical finance field, we propose the local weak form meshless methods for option pricing; especially in this paper we select and analysis two schemes of them named local boundary integral equation method (LBIE)…