Optimal Transport for Model Calibration

descriptionPublicationkeyboard_double_arrow_right Article , Preprint , Other literature type 01 Jan 2021Embargo end date: 01 Jan 2021 United Kingdom English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

Copyright policy )Funded by:ARC | Discovery Projects - Gran...

Authors: Guo, I; Loeper, G; Obloj, J; Wang, S;

doi: 10.2139/ssrn.3876854 , 10.48550/arxiv.2107.01978

arXiv: 2107.01978

Optimal Transport for Model Calibration

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Abstract

We provide a survey of recent results on model calibration by Optimal Transport. We present the general framework and then discuss the calibration of local, and local-stochastic, volatility models to European options, the joint VIX/SPX calibration problem as well as calibration to some path-dependent options. We explain the numerical algorithms and present examples both on synthetic and market data.

15 pages, 9 figures

Country

United Kingdom

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Keywords

FOS: Economics and business, Quantitative Finance - Mathematical Finance, Optimization and Control (math.OC), FOS: Mathematics, Mathematics - Optimization and Control, Mathematical Finance (q-fin.MF)

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