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Sequential Quadratic Programming Method for Volatility Estimation in Option Pricing
journal contribution
posted on 2023-06-08, 10:07 authored by Bertram Duering, A Jüngel, S VolkweinOur goal is to identify the volatility function in Dupires equation from given option prices. Following an optimal control approach in a Lagrangian framework, a globalized sequential quadratic programming (SQP) algorithm combined with a primal-dual active set strategy is proposed. Existence of local optimal solutions and of Lagrange multipliers is shown. Furthermore, a sufficient second-order optimality condition is proved. Finally, some numerical results are presented underlining the good properties of the numerical scheme.
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Publication status
- Published
Journal
Journal of Optimization Theory and ApplicationsISSN
0022-3239Publisher
Springer VerlagExternal DOI
Issue
3Volume
139Page range
515-540Department affiliated with
- Mathematics Publications
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- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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