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Article Contents

# The inverse volatility problem for American options

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• The problem of determining equity volatility from a knowledge of American option prices for a range of exercise (strike) prices and expirations is solved by minimization of a convex functional.

Mathematics Subject Classification: Primary: 35K10; Secondary: 65N21.

 Citation:

• Figure 1.  Flowchart

Figure 2.  GOOGLE put option data, 19th April, 2013

Figure 4.  Maturity interval $14\le T\le 21$: iterations of $g(S_0, t_0, K, T)$

Figure 5.  The functional $G$ for maturity $14\le T\le 21$

Figure 6.  Comparing option and recovered prices from the Dupire Equation

Figures(6)

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