Option pricing - Volatility interpolation - Developing an arbitrage-free, consistent volatility surface in both expiry and strike from a discrete set of option quotes is a difficult and computationally intense problem. In this article, the authors use a non-standard variant of the fully implicit finite difference method to reduce the computational cost by orders of magnitude. An example shows how ...

Derivatives pricing - Expanded forward volatility

Andreasen, Jesper, (2013)

Derivatives pricing - Random grids - In the context of a stochastic local volatility model, the authors present a numerical solution scheme that achieves full consistency between calibration, finite difference solution and Monte Carlo simulation. The method is based on a fully implicit finite difference scheme for the model.

Andreasen, Jesper, (2011)

CUTTING EDGE - Option pricing - Expanded smiles - Implementing models with stochastic as well as deterministic local volatility can be challenging. Here, the authors describe an expansion approach for such models that avoids the high-dimensional partial differential equations usually associated with their implementation.

Andreasen, Jesper, (2010)