Hot answers tagged local-volatility
For pricing, there are a few products whose prices are sensitive to the forward smile and when you compute that with just local vol, it is not realistic. So if you are a seller, you go to the next church and find something that looks kindof reasonable, and that kind of can reconstruct a reasonnable forward smile structure. The game in pricing is to not ...
The OpenGamma Analytics Library definitely does have a Local Volatility model available. In addition, in our Quantitative Papers page there's a link to the full mathematics and basis for our Local Volatility implementation. I'd be interested to know why you decided to write your own rather than using one of the above.
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