A Supplement to Remark on Local Volatility

5 Pages Posted: 6 Jun 2011 Last revised: 6 Jul 2011

Ilya I. Gikhman


Date Written: June 5, 2011


The concept of the Local Volatility was developed in [1-3]. Later this concept was broadly generalized and extends in particular to cover stochastic local volatility phenomena. A number of companies offer their products which call for more accurate forecast of options pricing and one can check that it is a quite significant business in financial world. In this paper we briefly outlined a critical point of view on mathematical basics of the construction of the Local Volatility in [4]. Here we present the Local Volatility concept in greater details.

Keywords: local volatility, call option

JEL Classification: G12, G13, C60

Suggested Citation

Gikhman, Ilya I., A Supplement to Remark on Local Volatility (June 5, 2011). Available at SSRN: https://ssrn.com/abstract=1858110 or http://dx.doi.org/10.2139/ssrn.1858110

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