کد مقاله کد نشریه سال انتشار مقاله انگلیسی نسخه تمام متن
4641878 1341322 2008 16 صفحه PDF دانلود رایگان
عنوان انگلیسی مقاله ISI
Computation and analysis for a constrained entropy optimization problem in finance
موضوعات مرتبط
مهندسی و علوم پایه ریاضیات ریاضیات کاربردی
پیش نمایش صفحه اول مقاله
Computation and analysis for a constrained entropy optimization problem in finance
چکیده انگلیسی

In [T. Coleman, C. He, Y. Li, Calibrating volatility function bounds for an uncertain volatility model, Journal of Computational Finance (2006) (submitted for publication)], an entropy minimization formulation has been proposed to calibrate an uncertain volatility option pricing model (UVM) from market bid and ask prices. To avoid potential infeasibility due to numerical error, a quadratic penalty function approach is applied. In this paper, we show that the solution to the quadratic penalty problem can be obtained by minimizing an objective function which can be evaluated via solving a Hamilton–Jacobian–Bellman (HJB) equation. We prove that the implicit finite difference solution of this HJB equation converges to its viscosity solution. In addition, we provide computational examples illustrating accuracy of calibration.

ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Journal of Computational and Applied Mathematics - Volume 222, Issue 1, 1 December 2008, Pages 159–174
نویسندگان
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