Variational and Topological Methods: Theory, Applications, Numerical Simulations, and Open Problems.
Electron. J. Diff. Eqns., Conference 21 (2014), pp. 183-195.

The inverse volatility problem for European options

Ian Knowles, Li Feng, Ajay Mahato

Abstract:
The problem of determining equity volatility from a knowledge of European call option prices for a range of exercise (strike) prices and expirations is solved by minimization of a convex functional.

Published February 10, 2014.
Math Subject Classifications: 34B24, 65L09, 45J40.
Key Words: Inverse volatility; European option; Dupire equation; convex functional.

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Ian Knowles
Department of Mathematics
University of Alabama at Birmingham
Birmingham AL 35294, USA
email: iknowles@uab.edu
Li Feng
Department of Mathematics
University of Alabama at Birmingham
Birmingham AL 35294, USA
email: lifeng@uab.edu
Ajay Mahato
Department of Mathematics
University of Alabama at Birmingham
Birmingham AL 35294, USA
email: amahato7@gmail.com

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