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Efficient calibration for problems in option pricing |
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| Authors: | A M Giese C Kaebe J H Maruhn E W Sachs |
| Institution: | 1. UniCredit Markets & Investment Banking, Financial Engineering Equities and Hybrids, Bayerische Hypo- und Vereinsbank, 81925 Munich, Germany;2. Universität Trier, Fachbereich IV, Abteilung Mathematik, 54286 Trier, Germany;3. Universität Trier, Fachbereich IV, Abteilung Mathematik, 54286 Trier, Germany
Interdisciplinary Center for Applied Mathematics, Virginia Tech, Blacksburg, VA 24060, USA |
| Abstract: | The pricing of derivatives has gained considerable importance in the finance industry and leads to challenging problems in numerical optimization. We focus on the numerical solution of a stochastic model for option prices. In particular, we are concerned with the calibration of these models to real data, which leads to large scale optimization problems. We consider the numerical solution of these optimization problems and give some indication how to reduce the complexity of these problems. Special emphasis is devoted to a multi-layer strategy which is embedded into the optimization iteration. (© 2008 WILEY-VCH Verlag GmbH & Co. KGaA, Weinheim) |
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