Coleman, Thomas; Li, Yuying; Wang, Cheng - In: Computational Optimization and Applications 55 (2013) 3, pp. 675-702
We propose an optimization formulation using the l <Subscript>1</Subscript> norm to ensure accuracy and stability in calibrating a local volatility function for option pricing. Using a regularization parameter, the proposed objective function balances calibration accuracy with model complexity. Motivated by the...</subscript>