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Empirical semi-groups and calibration

Vlad Bally 1 Emmanuel Temam 1
1 MATHFI - Financial mathematics
Inria Paris-Rocquencourt, ENPC - École des Ponts ParisTech, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Abstract : We give a model free calibration algorithm based on a finite element type approach. Although no probabilistic model is a priori needed it turns out that the setting of our problem automatically produces a Markov dynamics for the underlying stock. Markovianity is our only a priori assumption. We test our algorithm using syntethic data produced by Dupire's model with several types of local volatility. In order to test the flexibility of our algorithm. We also consider data produced by Heston's model which is a stochastic volatility model which is no more Markovian and does not enter in our frame.
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Submitted on : Tuesday, May 23, 2006 - 6:35:10 PM
Last modification on : Thursday, February 3, 2022 - 11:18:49 AM
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  • HAL Id : inria-00071710, version 1



Vlad Bally, Emmanuel Temam. Empirical semi-groups and calibration. [Research Report] RR-4873, INRIA. 2003. ⟨inria-00071710⟩



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