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Special Semester on Stochastics with Emphasis on Finance
Linz, September 2008 - December 2008
Presentation: Approximate closed formulas in stochastic volatility models

Workshop: Computational Methods with Applications in Finance, Insurance and the Life Sciences AND Stochastic Methods in Partial Differential Equations and Applications of Deterministic and Stochastic PDEs

Time: Tue, November 18, 2008, 15:00-15:50

Speaker: Emmanuel Gobet

Abstract

With the use of stochastic analysis tools, we show how call prices in stochastic volatility models can be accurately approximated by analytical formulae. Indeed we perform a smart expansion using a model proxy. Then the price is that of model proxy plus a combination of Greeks in that model. As a consequence, the calibration of such model becomes very fast.

Presentation slides (pdf, 375 KB)

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