Calibration of Volatility: Coupling between alternative regularization strategy and Dupire’s Equation
Abstract
we propose to use Dupire model coupled with the optimization algorithms proposed in (Chiarella et al., 2007) and (Lagnado and Osher, 1997). In order to improve the approximation of the initial guess of the volatility we propose to use a statistical approximation. The obtained results are compared with those obtained by N.El Hassan and with Lamarti (Aboulaich and Lamarti, 2013) which proposes another algorithm named ”jump indicator” in the case of a discontinuous volatility.
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