The collocating local volatility framework – a fresh look at efficient pricing with smile

DOI10.1080/00207160.2018.1547378zbMath1483.91252OpenAlexW2901884678MaRDI QIDQ5031708

Lech A. Grzelak

Publication date: 16 February 2022

Published in: International Journal of Computer Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/00207160.2018.1547378

zbMATH Keywords

Monte Carlobasket optionsstochastic collocation methodefficient pricingparametric local volatilitySCMC sampler

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Monte Carlo methods (65C05) Derivative securities (option pricing, hedging, etc.) (91G20) Spectral, collocation and related methods for initial value and initial-boundary value problems involving PDEs (65M70)

Related Items (3)

Calibration of the temporally varying volatility and interest rate functions ⋮ Monte Carlo simulation of SDEs using GANs ⋮ COLLOCATING VOLATILITY: A COMPETITIVE ALTERNATIVE TO STOCHASTIC LOCAL VOLATILITY MODELS

Uses Software

• pchip

Cites Work

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• THE HESTON STOCHASTIC-LOCAL VOLATILITY MODEL: EFFICIENT MONTE CARLO SIMULATION
• Monotone Piecewise Cubic Interpolation
• Stochastic Implied Trees: Arbitrage Pricing with Stochastic Term and Strike Structure of Volatility
• The stochastic collocation Monte Carlo sampler: highly efficient sampling from ‘expensive’ distributions
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• Valuing American Options by Simulation: A Simple Least-Squares Approach

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