SciComp Inc. Newsletter
Table of Contents
Sign-up to test drive this new Stochastic Local Volatility Calibrator.
Stop by our booth at Global Derivatives USA, November 19-22 in Chicago.
Our expert quantitative development staff at SciComp Consulting can develop a wide variety of derivatives pricing models, calibration routines and risk management tools that can be tailored to your requirements.
For more information on SciFinance, contact SciComp
The SLV Calibrator is based on a method first proposed by Lipton [Risk, Feb 2002] and follows the implementation described in 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, it 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 the mixes the two models together either by a) calibrating to selected exotics, or b) using historical data.
SciComp to Exhibit at Global Derivatives USA - Chicago
SciComp will demonstrate its products and have a speaking slot at the event. Visit us at our booth, we would like to discuss with you how we can help to take your derivatives pricing to the next level. We look forward to seeing you there.
As a special discount to readers of our newsletters, quote VIP code: FKN2366SCIEM and receive a 25% discount.
Our expert quantitative development staff at SciComp Consulting can develop a wide variety of derivatives pricing models, calibration routines and risk management tools that can be tailored to your requirements. Our expert quant/developer staff has years of derivatives experience, developing pricing models for financial institutions around the globe.