Research Seminar by Slavi Georgiev – Institute of Finance
The lecture is entitled “On two numerical approaches to identify the time-dependent implied volatility from option quotes”.
Location: Corvinus University, Main Building, Auditorium III.
Date: 18 September 2023
Time: 11:40 am
Language: English
Slavi Georgiev: On two numerical approaches to identify the time-dependent implied volatility from option quotes
Abstract: In this report, we will present two numerical approaches to reconstruct the implied volatility. The first one is based on a special decomposition after a linearization in time of the diffusion terms. This method has been developed for a variety of Black-Scholes type models, including jump-diffusion framework, regime-switching economy and multi-asset options. It is possible to adapt the method for other more exotic options. The second approach recovers the volatility level as a piecewise linear function of time, using a set of market measurements. The volatility is recovered in iterational manner with respect to the maturities. Both approaches are tested with a plenty of synthetic and real data.