caa a22 4500 475754328 CHVBK 20180406123533.0 cr unu---uuuuu 170329e20000501xx s 000 0 eng 10.1007/s102030050004 doi (NATIONALLICENCE)springer-10.1007/s102030050004 Volatility estimation from observed option prices [Elektronische Daten] [Phelim P. Boyle, Draviam Thangaraj] Abstract.: It is well established that the standard Black-Scholes model does a very poor job in matching the prices of vanilla European options. The implied volatility varies by both time to maturity and by the moneyness of the option. One approach to this problem is to use the market option prices to back out a local volatility function that reproduces the market prices. Since option price observations are only available for a limited set of maturities and strike prices, most algorithms require a smoothing technique to implement this approach. In this paper we modify the implementation of Andersen and Brotherton-Ratcliffe to provide another way of dealing with this issue. Numerical examples indicate that our approach is reasonably successful in reproducing the input prices. Springer-Verlag Italia, 2000 Mathematics Subject Classification (2000): 91B28 nationallicence Journal of Economic Literature Classification: C61, C63 nationallicence Boyle Phelim P. J. Page Wadsworth Chair of Finance, Center for Advanced Studies in Finance, University of Waterloo¶e-mail: pboyle@watarts.uwaterloo.ca, CA aut Thangaraj Draviam Center for Advanced Studies in Finance and Department of Statistics & Actuarial Science, University of Waterloo¶e-mail: t2draviam@elora.uwaterloo.ca, CA aut https://doi.org/10.1007/s102030050004 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1007/s102030050004 text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Boyle Phelim P. J. Page Wadsworth Chair of Finance, Center for Advanced Studies in Finance, University of Waterloo¶e-mail: pboyle@watarts.uwaterloo.ca, CA aut NATIONALLICENCE 700 1- Thangaraj Draviam Center for Advanced Studies in Finance and Department of Statistics & Actuarial Science, University of Waterloo¶e-mail: t2draviam@elora.uwaterloo.ca, CA aut Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer