Abstract

http://ssrn.com/abstract=1496982
 
 

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Fitting the Smile, Smart Parameters for SABR and Heston


Pierre Gauthier


Daiwa Capital Markets Europe

Pierre-Yves Henri Rivaille



October 30, 2009


Abstract:     
In this paper we revisit the problem of calibrating stochastic volatility models. By finding smart initial parameters, we improve robustness of Levenberg-Marquardt. Applying this technique to the SABR and Heston models reduces calibration time by more than 90% compared to global optimization techniques such as Simplex or Differential Evolution.

Number of Pages in PDF File: 13

Keywords: Stochastic volatility, SABR, Heston, Smile volatility, Calibration, Optimization

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Date posted: October 31, 2009  

Suggested Citation

Gauthier, Pierre and Rivaille, Pierre-Yves Henri, Fitting the Smile, Smart Parameters for SABR and Heston (October 30, 2009). Available at SSRN: http://ssrn.com/abstract=1496982 or http://dx.doi.org/10.2139/ssrn.1496982

Contact Information

Pierre Gauthier
Daiwa Capital Markets Europe ( email )
5 King William Street
London, EC4N 7DA
United Kingdom
No contact information is available for Pierre-Yves Henri Rivaille
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