Volatility interpolation

Volatility interpolation

Local volatility models such as those of Dupire (1994), Andersen & Andreasen (1999), JP Morgan (1999) and Andreasen & Huge (2010) ideally require a full continuum in expiry and strike of arbitrage-consistent European-style option prices as input. In practice, of course, we only observe a discrete set of option prices.

Volatility interpolation

7 days in 60 seconds

Forex mispricing, Pillar 2 and the volatility trap

The week on Risk.net, February 10-16, 2018