Fast Ninomiya–Victoir calibration of the double-mean-reverting model

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Standard

Fast Ninomiya–Victoir calibration of the double-mean-reverting model. / Bayer, Christian ; Gatheral, Jim ; Karlsmark, Morten.

I: Quantitative Finance, Bind 13, Nr. 11, 2013, s. 1813-1826.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Bayer, C, Gatheral, J & Karlsmark, M 2013, 'Fast Ninomiya–Victoir calibration of the double-mean-reverting model', Quantitative Finance, bind 13, nr. 11, s. 1813-1826. https://doi.org/10.1080/14697688.2013.818245

APA

Bayer, C., Gatheral, J., & Karlsmark, M. (2013). Fast Ninomiya–Victoir calibration of the double-mean-reverting model. Quantitative Finance, 13(11), 1813-1826. https://doi.org/10.1080/14697688.2013.818245

Vancouver

Bayer C, Gatheral J, Karlsmark M. Fast Ninomiya–Victoir calibration of the double-mean-reverting model. Quantitative Finance. 2013;13(11):1813-1826. https://doi.org/10.1080/14697688.2013.818245

Author

Bayer, Christian ; Gatheral, Jim ; Karlsmark, Morten. / Fast Ninomiya–Victoir calibration of the double-mean-reverting model. I: Quantitative Finance. 2013 ; Bind 13, Nr. 11. s. 1813-1826.

Bibtex

@article{0bc13d9c932343c6a9258e572b42dc6c,
title = "Fast Ninomiya–Victoir calibration of the double-mean-reverting model",
abstract = "We consider the three-factor double mean reverting (DMR) option pricing model of Gatheral [Consistent Modelling of SPX and VIX Options, 2008], a model which can be successfully calibrated to both VIX options and SPX options simultaneously. One drawback of this model is that calibration may be slow because no closed form solution for European options exists. In this paper, we apply modified versions of the second-order Monte Carlo scheme of Ninomiya and Victoir [Appl. Math. Finance, 2008, 15, 107–121], and compare these to the Euler–Maruyama scheme with full truncation of Lord et al. [Quant. Finance, 2010, 10(2), 177–194], demonstrating on the one hand that fast calibration of the DMR model is practical, and on the other that suitably modified Ninomiya–Victoir schemes are applicable to the simulation of much more complicated time-homogeneous models than may have been thought previously.",
author = "Christian Bayer and Jim Gatheral and Morten Karlsmark",
year = "2013",
doi = "10.1080/14697688.2013.818245",
language = "English",
volume = "13",
pages = "1813--1826",
journal = "Quantitative Finance",
issn = "1469-7688",
publisher = "Routledge",
number = "11",

}

RIS

TY - JOUR

T1 - Fast Ninomiya–Victoir calibration of the double-mean-reverting model

AU - Bayer, Christian

AU - Gatheral, Jim

AU - Karlsmark, Morten

PY - 2013

Y1 - 2013

N2 - We consider the three-factor double mean reverting (DMR) option pricing model of Gatheral [Consistent Modelling of SPX and VIX Options, 2008], a model which can be successfully calibrated to both VIX options and SPX options simultaneously. One drawback of this model is that calibration may be slow because no closed form solution for European options exists. In this paper, we apply modified versions of the second-order Monte Carlo scheme of Ninomiya and Victoir [Appl. Math. Finance, 2008, 15, 107–121], and compare these to the Euler–Maruyama scheme with full truncation of Lord et al. [Quant. Finance, 2010, 10(2), 177–194], demonstrating on the one hand that fast calibration of the DMR model is practical, and on the other that suitably modified Ninomiya–Victoir schemes are applicable to the simulation of much more complicated time-homogeneous models than may have been thought previously.

AB - We consider the three-factor double mean reverting (DMR) option pricing model of Gatheral [Consistent Modelling of SPX and VIX Options, 2008], a model which can be successfully calibrated to both VIX options and SPX options simultaneously. One drawback of this model is that calibration may be slow because no closed form solution for European options exists. In this paper, we apply modified versions of the second-order Monte Carlo scheme of Ninomiya and Victoir [Appl. Math. Finance, 2008, 15, 107–121], and compare these to the Euler–Maruyama scheme with full truncation of Lord et al. [Quant. Finance, 2010, 10(2), 177–194], demonstrating on the one hand that fast calibration of the DMR model is practical, and on the other that suitably modified Ninomiya–Victoir schemes are applicable to the simulation of much more complicated time-homogeneous models than may have been thought previously.

U2 - 10.1080/14697688.2013.818245

DO - 10.1080/14697688.2013.818245

M3 - Journal article

VL - 13

SP - 1813

EP - 1826

JO - Quantitative Finance

JF - Quantitative Finance

SN - 1469-7688

IS - 11

ER -

ID: 115695060