Cross-currency smile calibration

We document the numerical aspects of the calibration of cross-currency options on the local volatility framework. We consider the partial differential equation satisfied by the price of the cross-currency option and see that the most important specifications to set are the boundary conditions. We explain how these conditions can be approximated and test the validity of the approximation on simple cases.

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Year of publication:	2009-02-01
Authors:	Turinici, Gabriel ; Laillat, Marc
Institutions:	HAL
Subject:	cross-currency options \| calibration \| local volatility \| implied volatility \| Dupire formula \| adjoint \| boundary conditions

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Extent:	application/pdf
Series:	Post-Print.
Type of publication:	Book / Working Paper
Language:	English
Notes:	View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00351016 Published - Presented, Modelling, Identification and Control, 2009, Innsbruck, Austria
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008789152