Algorithm for Determining the Volatility Function in the Black–Scholes Model

V. M. Isakov; S. I. Kabanikhin; A. A. Shananin; M. A. Shishlenin; S. Zhang

doi:10.1134/S0965542519100099

Algorithm for Determining the Volatility Function in the Black–Scholes Model

V. M. Isakov, S. I. Kabanikhin, A. A. Shananin, M. A. Shishlenin, S. Zhang

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

An algorithm for reconstructing the volatility function in the modified Black–Scholes model is developed. Results of numerical computations are presented. It is shown that adding information about the prices of similar options with different issue dates makes it possible to improve the accuracy and increase the interval in which the volatility function can be reconstructed.

Original language	English
Pages (from-to)	1753-1758
Number of pages	6
Journal	Computational Mathematics and Mathematical Physics
Volume	59
Issue number	10
DOIs	https://doi.org/10.1134/S0965542519100099
Publication status	Published - 1 Oct 2019

Keywords

Black–Scholes equation
coefficient inverse problem
local volatility
optimization

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10.1134/S0965542519100099

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abstract = "An algorithm for reconstructing the volatility function in the modified Black–Scholes model is developed. Results of numerical computations are presented. It is shown that adding information about the prices of similar options with different issue dates makes it possible to improve the accuracy and increase the interval in which the volatility function can be reconstructed.",

keywords = "Black–Scholes equation, coefficient inverse problem, local volatility, optimization",

author = "Isakov, {V. M.} and Kabanikhin, {S. I.} and Shananin, {A. A.} and Shishlenin, {M. A.} and S. Zhang",

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AU - Kabanikhin, S. I.

AU - Shananin, A. A.

AU - Shishlenin, M. A.

AU - Zhang, S.

PY - 2019/10/1

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AB - An algorithm for reconstructing the volatility function in the modified Black–Scholes model is developed. Results of numerical computations are presented. It is shown that adding information about the prices of similar options with different issue dates makes it possible to improve the accuracy and increase the interval in which the volatility function can be reconstructed.

KW - Black–Scholes equation

KW - coefficient inverse problem

KW - local volatility

KW - optimization

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Algorithm for Determining the Volatility Function in the Black–Scholes Model

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Keywords

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