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Düring, B. (2008). Calibration problems in option pricing. “International Conference on Price, Liquidity, and Credit Risks,” Konstanz, EU. http://hdl.handle.net/20.500.12708/118637
We review different approaches to calibrate volatility functions in Black-Scholes type models to market data. We focus on an optimal control approach, where a regularized cost functional is minimized over a suitable set of admissible volatilities. The cost functional measures the deviations of option prices obtained from a pricing model to the given market data. We discuss the Black-Scholes case as well as the extension to pricing models in markets with frictions, e.g. models for option pricing in the presence of transaction costs.
en
Project title:
Numerics and modeling of nonlinear partial differential equations for the description of credit and price risks (Deutsche Forschungsgemeinschaft)
