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: Suggested Citation
Andreasen, Jesper and Huge, Brian Norsk, Finite Difference Based Calibration and Simulation (October 20, 2010). Available at SSRN: https://ssrn.com/abstract=1697545 or http://dx.doi.org/10.2139/ssrn.1697545
By Daniel Bloch