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The Calibration of Stock Option Pricing Models Using Inverse Problem Methodology

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Author Info
Carl Chiarella () (School of Finance and Economics, University of Technology, Sydney)
Mark Craddock (Department of Mathematics, University of Technology, Sydney)
Nadima El-Hassan () (School of Finance and Economics, University of Technology, Sydney)

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Abstract

We analyse the procedure for determining volatility presented by Lagnado and Osher, and explain in some detail where the scheme comes from. We present an alternative scheme which avoids some of the technical complications arising in Lagnado and Osher's approach. An algorithm for solving the resulting equations is given, along with a selection of numerical examples.

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File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp39.pdf
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Publisher Info
Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 39.

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Date of creation: 01 Mar 2000
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Handle: RePEc:uts:rpaper:39

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Rubinstein, Mark, 1994. " Implied Binomial Trees," Journal of Finance, American Finance Association, vol. 49(3), pages 771-818, July. [Downloadable!] (restricted)
  2. Mark Rubinstein., 1994. "Implied Binomial Trees," Research Program in Finance Working Papers RPF-232, University of California at Berkeley. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Carl Chiarella & Mark Craddock & Nadima El-Hassan, 2003. "An Implementation of Bouchouev's Method for a Short Time Calibration of Option Pricing Models," Computational Economics, Springer, vol. 22(2), pages 113-138, October. [Downloadable!] (restricted)
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