2
$\begingroup$

I am trying to understand the assumptions and weaknesses of a Dupire Local Volatility model.

If dividends are assumed linear, is it a problem for model calibration? If yes, why?

Why would large values of discrete dividends cause calibration problems?

Is there a pedagogical resource to understand these limitations of Local Volatility models?

$\endgroup$
1

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.