Jiang, Lishang; Chen, Qihong; Wang, Lijun; Zhang, Jin - In: Quantitative Finance 3 (2003) 6, pp. 451-457
This paper presents a new algorithm to calibrate the option pricing model, i.e. the algorithm that recovers the implied local volatility function from market option prices in the optimal control framework. A unique optimal control is shown to exist. Our algorithm is well-posed. Our numerical...