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by yondaime
July 28th, 2020, 3:53 am
Forum: Technical Forum
Topic: Closed form formulae for Barrier options
Replies: 2
Views: 3971

Closed form formulae for Barrier options

Hi all, I have this paper (attached) by Andreas Weber and Uwe Wystup which gives closed form formulae for Barrier options (Sec 1.2). What I absolutely can't make any decision over is the part that whether the barrier style is American or European. I feel the formulae are for pricing the European sty...
by yondaime
June 2nd, 2020, 10:45 am
Forum: Technical Forum
Topic: Nabil Kahale's Smile Interpolation Paper
Replies: 3
Views: 8714

Nabil Kahale's Smile Interpolation Paper

Hi, I was going through the 2005 paper on "Smile interpolation and calibration of the local volatility model" by Nabil Kahale (attached). He gives Algorithm A which he describes as in attachment 1.  The c(j) and gamma(j) are mentioned in Theorem 3 of the same paper as in attachment 2. Unfo...
by yondaime
May 19th, 2020, 4:18 am
Forum: Technical Forum
Topic: Interpolation of a Implied Volatility Surface
Replies: 20
Views: 12879

Interpolation of a Implied Volatility Surface

Hi, I have an Implied volatility surface. I was using cubic spline interpolation to estimate the volatility at the in between points. However, the volatility data I have is a bit extreme because of rare events like Brexit. This is why the cubic spline isn't working everytime as there are arbitrage o...