Düring, Bertram (2007) A semi-smooth Newton method for an inverse problem in option pricing. In: Sixth International Congress on Industrial Applied Mathematics (ICIAM07) and GAMM Annual Meeting, 2007, Zürich.

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Abstract

We present an optimal control approach using a Lagrangian framework to identify local volatility functions from given option prices. We employ a globalized sequential quadratic programming (SQP) algorithm and implement a line search strategy. The linear-quadratic optimal control problems in each iteration are solved by a primal-dual active set strategy which leads to a semi-smooth Newton method. We present first- and second-order analysis as well as numerical results.

Item Type:	Conference or Workshop Item (Paper)
Schools and Departments:	School of Mathematical and Physical Sciences > Mathematics
Depositing User:	Bertram During
Date Deposited:	06 Feb 2012 19:21
Last Modified:	09 Jul 2012 13:36
URI:	http://sro.sussex.ac.uk/id/eprint/20254

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