Model-Free Stochastic Collocation for an Arbitrage-Free Implied Volatility, Part II

Model-Free Stochastic Collocation for an Arbitrage-Free Implied Volatility, Part II

This paper explores the stochastic collocation technique, applied on a monotonic spline, as an arbitrage-free and model-free interpolation of implied volatilities. We explore various spline formulations, including B-spline representations. We explain how to calibrate the different representations ag...

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Bibliographic Details
Main Authors: Fabien Le Floc’h, Cornelis W. Oosterlee
Format: Article
Language:English
Published: MDPI AG 2019-03-01
Series:Risks
Subjects:
stochastic collocation
implied volatility
quantitative finance
arbitrage-free
risk neutral density
B-spline
Online Access:http://www.mdpi.com/2227-9091/7/1/30

Internet

http://www.mdpi.com/2227-9091/7/1/30

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