Related papers: Geometric Local Variance Gamma model

The paper proposes an expanded version of the Local Variance Gamma model of Carr and Nadtochiy by adding drift to the governing underlying process. Still in this new model it is possible to derive an ordinary differential equation for the…

This paper generalizes the local variance gamma model of Carr and Nadtochiy, to a piecewise quadratic local variance function. The formulation encompasses the piecewise linear Bachelier and piecewise linear Black local variance gamma…

The calibration of a local volatility models to a given set of option prices is a classical problem of mathematical finance. It was considered in multiple papers where various solutions were proposed. In this paper an extension of the…

We propose an affine extension of the Linear Gaussian term structure Model (LGM) such that the instantaneous covariation of the factors is given by an affine process on semidefinite positive matrices. First, we set up the model and present…

Implied volatility is at the very core of modern finance, notwithstanding standard option pricing models continue to derive option prices starting from the joint dynamics of the underlying asset price and the spot volatility. These models…

We introduce a new class of local volatility models. Within this framework, we obtain expressions for both (i) the price of any European option and (ii) the induced implied volatility smile. As an illustration of our framework, we perform…

Volatility clustering is a common phenomenon in financial time series. Typically, linear models can be used to describe the temporal autocorrelation of the (logarithmic) variance of returns. Considering the difficulty in estimating this…

In Smyl et al. [Local and global trend Bayesian exponential smoothing models. International Journal of Forecasting, 2024.], a generalised exponential smoothing model was proposed that is able to capture strong trends and volatility in time…

Consistently fitting vanilla option surfaces is an important issue when it comes to modelling in finance. Local volatility models introduced by Dupire in 1994 are widely used to price and manage the risks of structured products. However,…

In [1], we calibrated a one-factor Cheyette SLV model with a local volatility that is linear in the benchmark forward rate and an uncorrelated CIR stochastic variance to 3M caplets of various maturities. While caplet smiles for many…

We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied…

This paper presents simple formulae for the local variance gamma model of Carr and Nadtochiy, extended with a piecewise-linear local variance function. The new formulae allow to calibrate the model efficiently to market option quotes. On a…

We analyse the behaviour of the implied volatility smile for options close to expiry in the exponential L\'evy class of asset price models with jumps. We introduce a new renormalisation of the strike variable with the property that the…

In this paper, we study time-varying graphical models based on data measured over a temporal grid. Such models are motivated by the needs to describe and understand evolving interacting relationships among a set of random variables in many…

We propose a neural network-based approach to calibrating stochastic volatility models, which combines the pioneering grid approach by Horvath et al. (2021) with the pointwise two-stage calibration of Bayer et al. (2018) and Liu et al.…

In some options markets (e.g. commodities), options are listed with only a single maturity for each underlying. In others, (e.g. equities, currencies), options are listed with multiple maturities. In this paper, we provide an algorithm for…

Local regression is widely used to explore spatial heterogeneity, but anisotropic or effectively low-dimensional neighborhoods can produce ill-conditioned local solves, causing coefficient variation driven by numerical artifacts rather than…

In recent years, dynamical relativistic jet simulation techniques have progressed to a point where it is becoming possible to fully numerically resolve gamma-ray burst (GRB) blast-wave evolution across scales. However, the modeling of…

For any smooth projective variety with a C* action, we reduce the problem of computing its Gromov-Witten invariants to the similar problem for its fixed locus. Starting from the stacky version of variation of GIT for our variety, we…

A non-Bayesian, regression-based or generalized least squares (GLS)-based approach is formally proposed to estimate a class of time-varying AR parameter models. This approach has partly been used by Ito et al. (2014, 2016a,b), and is proven…