Nonparametric Calibration of Derivatives Models

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Lixin Wu

Lixin Wu

University of Science and Technology, Kowloon, Hong Kong

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First published: 15 September 2008

Abstract

Model calibration is a procedure used to incorporate observed information in a derivatives market into a derivatives pricing model. We explain the motivations for model calibration, and introduce representative calibration technologies for equity and interest-rate derivatives markets.

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