Abstract
We consider calibration problems for models of pricing derivatives which occur in mathematical finance. We discuss various approaches such as using stochastic differential equations or partial differential equations for the modeling process. We discuss the development in the past literature and give an outlook into modern approaches of modelling. Furthermore, we address important numerical issues in the valuation of options and likewise the calibration of these models. This leads to interesting problems in optimization, where, e.g., the use of adjoint equations or the choice of the parametrization for the model parameters play an important role.
Keywords
Publication details
- DOI
- 10.24200/squjs.vol17iss1pp84-102
- Journal
- Sultan Qaboos University Journal for Science, 16, 84
- Publisher
- Sultan Qaboos University
- Open access
- Gold open access
- License
- CC BY 4.0
Cite this article
APA 7
Loerx, A., & Sachs, E. W. (2012). Model Calibration in Option Pricing. Sultan Qaboos University Journal for Science, 16, 84. https://doi.org/10.24200/squjs.vol17iss1pp84-102
MLA 9
Loerx, Andre, and E. W. Sachs. "Model Calibration in Option Pricing." Sultan Qaboos University Journal for Science, vol. 16, 2012, pp. 84. https://doi.org/10.24200/squjs.vol17iss1pp84-102.
Chicago (author–date)
Loerx, Andre, and E. W. Sachs. 2012. "Model Calibration in Option Pricing." Sultan Qaboos University Journal for Science 16: 84. https://doi.org/10.24200/squjs.vol17iss1pp84-102.
Harvard
Loerx, A. and Sachs, E. W. (2012) 'Model Calibration in Option Pricing', Sultan Qaboos University Journal for Science, 16, pp. 84. doi:10.24200/squjs.vol17iss1pp84-102.
Vancouver
Loerx A, Sachs EW. Model Calibration in Option Pricing. Sultan Qaboos University Journal for Science. 2012;16:84. doi:10.24200/squjs.vol17iss1pp84-102
IEEE
A. Loerx, and E. W. Sachs, "Model Calibration in Option Pricing," Sultan Qaboos University Journal for Science, vol. 16, pp. 84, 2012, doi: 10.24200/squjs.vol17iss1pp84-102.