Finite Difference Based Calibration and Simulation

14 Pages Posted: 27 Oct 2010 Last revised: 30 Oct 2010

Date Written: October 20, 2010


In the context of a stochastic local volatility model, we present a numerical solution scheme that achieves full (discrete) consistency between calibration, finite difference solution and Monte-Carlo simulation. The method is based on an ADI finite difference discretisation of the model.

Keywords: Stochastic local volatility, finite difference solution, calibration, simulation

JEL Classification: G12, G13

Suggested Citation

Andreasen, Jesper and Huge, Brian Norsk, Finite Difference Based Calibration and Simulation (October 20, 2010). Available at SSRN: or

Jesper Andreasen (Contact Author)

Verition Group LLC ( email )

20 st james street
London, SW1A 1ES
United Kingdom

Brian Norsk Huge

Saxo Bank ( email )


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