Re: local volatility surface

Posted by Klaus Spanderen-2 on
URL: http://quantlib.414.s1.nabble.com/local-volatility-surface-tp7862p7863.html

Hi Kim

On Tuesday 04 August 2009 22:15:23 Kim Kuen Tang wrote:
> (iii) A pricing engine for european options needs to be implemented that
> calculates the market value according a given dupire process. This
> pricing engine will be used as part of the calibration procedure. This
> part is almost finished using finite element.

The performance of the finite difference pricing engine might (will) be too
slow for calibration purposes if you are using the backwards equation to
price option by option. The forward equation of the problem (s. Fokker-Planck
equation) allows you to price all calibration options at once and will give
you a real performance boost.

cheers
 Klaus


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