Search results with tag "Local volatility"
Lecture 1: Stochastic Volatility and Local Volatility
web.math.ku.dkprice of volatility risk because it tells us how much of the expected return of V is explained by the risk (i.e. standard deviation) of v in the Capital Asset Pricing Model framework. 2 Local Volatility 2.1 History Given the computational complexity of stochastic volatility models and the
Derivation of Local Volatility - Fabrice Rouah
frouah.comDerivation of Local Volatility by Fabrice Douglas Rouah www.FRouah.com www.Volopta.com The derivation of local volatility is outlined in many papers and textbooks
Managing Smile Risk
web.math.ku.dkThe development of local volatility modelsby Dupire [2], [3] and Derman-Kani [4], [5] was a major advance in handling smiles and skews. Local volatility models are self-consistent, arbitrage-free, and can be calibrated to precisely match observed market smiles and skews. Currently these mod-els are the most popular way of managing smile and ...