We document the calibration of the local volatility in terms of local and implied instantaneous variances; we first explore the theoretical properties of the method for a particular class of volatilities. We confirm the theoretical results through a numerical procedure which uses a Gauss-Newton...

We document the calibration of the local volatility in a frame- work similar to Coleman, Li and Verma. The quality of a surface is assessed through a functional to be optimized; the specificity of the approach is to separate the optimization (performed with any suitable optimization algorithm)...

We consider a two-period model in which a continuum of agents trade in a context of costly information acquisition and systematic heterogeneous expectations biases. Because of systematic biases agents are supposed not to learn from others' decisions. In a previous work under somehow strong...

We investigate in this paper a perpetual prepayment option related to a corporate loan.The default intensity of the firmis supposed to follow a CIR process. We assume that the contractual margin of the loan is defined by the credit quality of the borrower and the liquidity cost that reflects the...

We investigate in this paper the recovery of the local volatility surface in a parametric framework similar to that of Coleman, Li and Verma [4]. The quality of a surface is assessed through a functional which is optimized; the specificity of the approach is to separate the optimization on the...

We document the calibration of the local volatility in a framework similar to Coleman, Li and Verma. The quality of a surface is assessed through a functional to be optimized; the specificity of the approach is to separate the optimization (performed with any suitable optimization algorithm) from...