The regularized implied local volatility equations -- a new model to recover the volatility of underlying asset from observed market option price

DOI10.3934/DCDSB.2012.17.2017zbMath1273.35169OpenAlexW2328121935MaRDI QIDQ449296

Li-Shang Jiang, Baojun Bian

Publication date: 12 September 2012

Published in: Discrete and Continuous Dynamical Systems. Series B (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.3934/dcdsb.2012.17.2017

zbMATH Keywords

inverse problemvariational inequalityparabolic equationimplied local volatility

Mathematics Subject Classification ID

Sensitivity, stability, well-posedness (49K40) Optimality conditions for problems involving partial differential equations (49K20) Variational inequalities (49J40) Unilateral problems for linear parabolic equations and variational inequalities with linear parabolic operators (35K85) Inverse problems for PDEs (35R30) Existence theories for optimal control problems involving partial differential equations (49J20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91)

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An inverse problem of reconstructing option drift rate from market observation data ⋮ Calibration of stochastic volatility models: a Tikhonov regularization approach ⋮ Entropy binomial tree method and calibration for the volatility smile

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