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Cross-currency smile calibration

Turinici, Gabriel; Laillat, Marc (2009), Cross-currency smile calibration, in Hangos, K.M., Modelling, Identification and Control (MIC 2009), ACTA Press : Calgary (Ca)

Type
Communication / Conférence
External document link
http://hal.archives-ouvertes.fr/hal-00351016/en/
Date
2009
Conference title
MIC 2009 Modelling, Identification and Control
Conference date
2009-02
Conference city
Innsbruck
Conference country
Autriche
Book title
Modelling, Identification and Control (MIC 2009)
Book author
Hangos, K.M.
Publisher
ACTA Press
Published in
Calgary (Ca)
ISBN
978-0-88986-781-9
Number of pages
Track 640 080
Metadata
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Author(s)
Turinici, Gabriel cc
Laillat, Marc
Abstract (EN)
We document the numerical aspects of the calibration of cross-currency options on the local volatility framework. We consider the partial differential equation satisfied by the price of the cross-currency option and see that the most important specifications to set are the boundary conditions. We explain how these conditions can be approximated and test the validity of the approximation on simple cases.
Subjects / Keywords
calibration; Dupire formula; adjoint; boundary conditions; local volatility; implied volatility; cross-currency options
JEL
G12 - Asset Pricing; Trading Volume; Bond Interest Rates