Here we develop an approach for efficient pricing discrete-time American and Bermudan options which employs the fact that such options are equivalent to theEuropean ones with a consumption, combined with analysis of the market model over a small number of steps ahead. This approach allows...

In this paper we propose a jump-diffusion Libor model with jumps in ahigh-dimensional space (R^m) and test a stable non-parametric calibrationalgorithm which takes into account a given local covariance structure.The algorithm returns smooth and simply structured Lévy densities, andpenalizes the...

This paper presents a new method for spatially adaptive local likelihood estimation which applies to a broad class of nonparametric models, including the Gaussian, Poisson and binary response models. The main idea of the method is given a sequence of local likelihood estimates ("weak"...

The calibration of financial models has become rather important topic in recent years mainly because of the need to price increasingly complex options in a consistent way. The choice of the underlying model is crucial for the good performance of any calibration procedure. Recent empirical...

We investigate the problem of calibrating an exponential Lévy model based on market prices of vanilla options. We show that this inverse problem is in general severely ill-posed and we derive exact minimax rates of convergence. The estimation procedure we propose is based on the explicit...

In this article we propose several pathwise and finite difference based methods for calculating sensitivities of Bermudan options using regression methods and Monte Carlo simulation. These methods rely on conditional probabilistic representations which allow, in combination with a regression...

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration prodecure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to...

This paper presents a new method for spatially adaptive local likelihood estimation which applies to a broad class of nonparametric models, including the Gaussian, Poisson and binary response models. The main idea of the method is given a sequence of local likelihood estimates ("weak"...

Here we develop an approach for efficient pricing discrete-time American and Bermudan options which employs the fact that such options are equivalent to the European ones with a consumption, combined with analysis of the market model over a small number of steps ahead. This approach allows...