Fitting the implied volatility surface (Paperback) (ISBN-13: 9783639720501)

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.

Author: Immanuel Dobler
ISBN-10: 3639720504
ISBN-13: 9783639720501
Publisher: AV Akademikerverlag
Language: English
Published: 09/29/2014
Pages: 136
Format: Paperback
Weight: 0.46lbs
Size: 9.00h x 6.00w x 0.32d