Technical paper/Local volatility models
The importance of being scrambled: supercharged quasi-Monte Carlo
The authors propose a randomized quasi-Monte Carlo method which outperforms both the Monte Carlo and standard quasi-Monte Carlo methods.
Optimal transport for model calibration
Volatility models and SPX/VIX joint dynamics are calibrated using optimal transport theory
Probabilistic machine learning for local volatility
In this paper, the authors propose to approach the calibration problem of local volatility with Bayesian statistics to infer a conditional distribution over functions given observed data.
Sticky varswaps
Bergomi's skew-stickiness ratio is extended to the setting of variance swaps
The step stochastic volatility model
Extreme short-dated skew can be obtained by decomposing it in two parts
What is the volatility of an Asian option?
An adjustment for the volatility smile in Asian options is proposed
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
A new arbitrage-free parametric volatility surface
A new arbitrage-free volatility surface with closed-form valuation and local volatility is introduced
One-dimensional Markov-functional models driven by a non-Gaussian driver
The aim of this paper is to move away from a Gaussian assumption and to provide new algorithms that can be used to implement a Markov-functional model driven by a more general class of one-dimensional diffusion processes.
The interplay between stochastic volatility and correlations in equity autocallables
Study shows issues with pricing autocallables using SLV
Local stochastic volatility: shaken, not stirred
Dominique Bang introduces a novel LSV approach to term distribution modelling
The optimal investment problem in stochastic and local volatility models
This paper considers the classical optimal investment allocation problem of Merton through the lens of some more modern approaches, such as the stochastic volatility and local volatility models.
Knocking out corridor variance
Amine Ahallal and Olaf Torne add a knock-out barrier to the standard corridor variance swap
Bermudan swaption model risk analysis: a local volatility approach
This paper seeks to contribute a simple and (almost) model-free way of assessing the economic value of the Bermudan exercise right derived from a “minimal” local volatility enhanced interest rate model.
Equity modelling with local stochastic volatility and stochastic discrete dividends
SocGen quants calibrate local stochastic volatility models with stochastic dividends
The swap market model with local stochastic volatility
An easy to calibrate and accurate swap market model is proposed
Local volatility from American options
De Marco and Henry-Labordère provide an approximation of American options in terms of the local volatility function
A nonparametric local volatility model for swaptions smile
This paper proposes a nonparametric local volatility Cheyette model and applies it to pricing interest rate swaptions.
Local volatility models in commodity markets and online calibration
This paper introduces a local volatility model for the valuation of options on commodity futures by using European vanilla option prices.
Interest rate models enhanced with local volatility
Lingling Cao and Pierre Henry-Labordère implement Dupire's local volatility in interest rate models
Cross-dependent volatility
Julien Guyon introduces cross-dependent volatility models and calibrate them to market smiles