Print Email Facebook Twitter Model-free stochastic collocation for an arbitrage-free implied volatility Title Model-free stochastic collocation for an arbitrage-free implied volatility: Part I Author Le Floch, F.L.Y. (TU Delft Numerical Analysis) Oosterlee, C.W. (TU Delft Numerical Analysis; Centrum Wiskunde & Informatica (CWI)) Date 2019-12-01 Abstract This paper explains how to calibrate a stochastic collocation polynomial against market option prices directly. The method is first applied to the interpolation of short-maturity equity option prices in a fully arbitrage-free manner and then to the joint calibration of the constant maturity swap convexity adjustments with the interest rate swaptions smile. To conclude, we explore some limitations of the stochastic collocation technique. Subject Arbitrage-freeImplied volatilityQuantitative financeRisk-neutral densityStochastic collocation To reference this document use: http://resolver.tudelft.nl/uuid:a3d18703-36a2-43d5-9d98-cd60eb00051b DOI https://doi.org/10.1007/s10203-019-00238-x ISSN 1593-8883 Source Decisions in Economics and Finance: a journal of applied mathematics, 42 (2), 679-714 Part of collection Institutional Repository Document type journal article Rights © 2019 F.L.Y. Le Floch, C.W. Oosterlee Files PDF s10203_019_00238_x.pdf 939.7 KB Close viewer /islandora/object/uuid:a3d18703-36a2-43d5-9d98-cd60eb00051b/datastream/OBJ/view