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Reconstruction of local volatility for the binary option model.

Authors :
Yasushi Ota
Shunsuke Kaji
Source :
Journal of Inverse & Ill-Posed Problems. Dec2016, Vol. 24 Issue 6, p727-741. 15p.
Publication Year :
2016

Abstract

The aim of this paper is to reconstruct local volatility from market prices of binary options. In the case of the space-dependent volatility, we obtain the stable linearization and the available integral equation to identify local volatility from observable data of binary options. We achieve the reconstruction of local volatility by numerical simulation. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
09280219
Volume :
24
Issue :
6
Database :
Academic Search Index
Journal :
Journal of Inverse & Ill-Posed Problems
Publication Type :
Academic Journal
Accession number :
119711944
Full Text :
https://doi.org/10.1515/jiip-2013-0051