Feng, Yu; Rudd, Ralph; Baker, Christopher; Mashalaba, … - In: Risks 9 (2021) 1, pp. 1-20
We focus on two particular aspects of model risk: the inability of a chosen model to fit observed market prices at a given point in time (calibration error) and the model risk due to the recalibration of model parameters (in contradiction to the model assumptions). In this context, we use...