Düring, B, Jüngel, A and Volkwein, S (2008) Sequential Quadratic Programming Method for Volatility Estimation in Option Pricing. Journal of Optimization Theory and Applications, 139 (3). pp. 515-540. ISSN 0022-3239

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Abstract

Our 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.

Item Type:	Article
Schools and Departments:	School of Mathematical and Physical Sciences > Mathematics
Depositing User:	Bertram During
Date Deposited:	06 Feb 2012 21:29
Last Modified:	30 Apr 2012 16:19
URI:	http://sro.sussex.ac.uk/id/eprint/31421

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