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Local Volatility and Dupire’s Equation

In: Fitting Local Volatility Analytic and Numerical Approaches in Black-Scholes and Local Variance Gamma Models

Author

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  • Andrey Itkin
Abstract
Local volatility model was invented around 1994 in [Dupire (1994)] for the continuous case and [Derman and Kani (1994a)] for the discrete case in response to the following problem…

Suggested Citation

  • Andrey Itkin, 2020. "Local Volatility and Dupire’s Equation," World Scientific Book Chapters, in: Fitting Local Volatility Analytic and Numerical Approaches in Black-Scholes and Local Variance Gamma Models, chapter 1, pages 3-12, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811212772_0001
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    More about this item

    Keywords

    Local Volatility; Stochastic Clock; Geometric Process; Gamma Distribution; Piecewise Linear Volatility; Variance Gamma Process; Closed Form Solution; Fast Calibration; No-Arbitrage;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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