Local Volatility Models

descriptionPublicationkeyboard_double_arrow_right Part of book or chapter of book , Other literature type 01 Jan 2016Publisher:Springer International Publishing

Authors: Bruno Bouchard; Jean-François Chassagneux;

doi: 10.1007/978-3-319-38990-5_7

Local Volatility Models

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Abstract

We present here the main characteristics of local volatility models in which the volatility of the risky assets is a function of time and of the spot value of the underlying. It is a standard in the industry. They are flexible enough to fit the vanilla option prices of all maturities, while preserving the completeness of the market. This permits a clear identification of the hedging strategy, see Chap. 4

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