Stochastic Local Volatility Calibrator

SLV Calibrator

The SLV Calibrator is based on the work of Ren, Madan and Qian [Risk, Sept 2007], Lipton [Risk, Feb 2002], Jex, Henderson and Wang [J.P.Morgan, 1999], and the Bloomberg paper "Stochastic Local Volatility" by Tataru & Fisher.

The SLV Calibrator takes any calibrated LV surface that matches vanillas. Then, using a non-linear Fokker-Planck equation, one adds a SV component and for any given set of SV parameters computes a new "leveraged local volatility surface" that still matches the vanillas, while accommodating SV. The SLV Calibrator then applies to this PDE solution a Levenberg-Marquardt optimizer and finds the (time bucketed) SV parameters that yield a maximally flat leveraged local volatility surface. At this point you have the pure LV model (the original LV surface) and the pure SV model (the SV parameters that yield a nearly flat leveraged LV surface). Both models fit the vanillas. The SLV Calibrator then solves for a mixing fraction then mixes the two models together either by a) calibrating to selected exotics, or b) using historical data.

Get your Stochastic Local Volatility Calibrator
test drive rolling:

First Name clear

 

Test drive

Last Name

 

Email address

 

Phone Number

 

Company Name

 

Job Function

 

Street Address

 

City

 

State, Post Code

 

Country

 

Where did you hear about us?

     

Are you a robot?

12+2 =

 

Questions/needs:

     


  

Why use SciComp Consulting?

  • Expertise: Our expert quant/developer staff has years of derivatives experience developing pricing models for financial institutions around the globe.
  • Industry standard or customized derivatives solutions: Comprehensive selection of industry standard derivatives pricing models and calibrators, any of which can be customized to meet your exact needs.
  • Pricing models tailored to customer requirements: Customers may specify model features such as the underlying dynamics, the market data and formats, and model output, or they may default such decisions to our expert quant/developer staff.
  • Performance enhanced pricing models: GPU-enabled or OpenMP-compliant derivatives pricing models.

 

Need more information on Calibrators? Contact us >>