Calibrating Option Pricing Models with Heuristics
AbstractCalibrating option pricing models to market prices often leads to optimisation problems to which standard methods (like such based on gradients) cannot be applied. We investigate two models: Heston’s stochastic volatility model, and Bates’s model which also includes jumps. We discuss how to price options under these models, and how to calibrate the parameters of the models with heuristic techniques.
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Bibliographic InfoPaper provided by COMISEF in its series Working Papers with number 030.
Length: 39 pages
Date of creation: 08 Mar 2010
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-20 (All new papers)
- NEP-CMP-2010-03-20 (Computational Economics)
- NEP-ORE-2010-03-20 (Operations Research)
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