Skindilias, Konstantinos; Lo, Chia - In: Review of Quantitative Finance and Accounting 44 (2015) 3, pp. 425-444
We propose a methodology to calibrate the local volatility function under a continuous time setting. For this purpose, we used the Markov chain approximation method built on the well-established idea of local consistency. The chain was designed to approximate jump–diffusions coupled with a...