Munich Personal RePEc Archive

Accelerating the calibration of stochastic volatility models

Kilin, Fiodar (2006): Accelerating the calibration of stochastic volatility models.

[img]
Preview
PDF
MPRA_paper_2975.pdf

Download (173Kb) | Preview

Abstract

This paper compares the performance of three methods for pricing vanilla options in models with known characteristic function: (1) Direct integration, (2) Fast Fourier Transform (FFT), (3) Fractional FFT. The most important application of this comparison is the choice of the fastest method for the calibration of stochastic volatility models, e.g. Heston, Bates, Barndor®-Nielsen-Shephard models or Levy models with stochastic time. We show that using additional cache technique makes the calibration with the direct integration method at least seven times faster than the calibration with the fractional FFT method.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.