Questions tagged [interpolation]
The interpolation tag has no usage guidance.
23
questions with no upvoted or accepted answers
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Creating the local volatility surface from the IV surface
I have been using the dupire equation:
$$ \sigma_{LV} (K,T) = \frac{\sigma_{i m p}^2+2 \sigma_{i m p} T\left(\frac{\partial \sigma_{i m p}}{\partial T}+(r-q) K \frac{\partial \sigma_{i m p}}{\partial ...
- 45
3
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55
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When getting the local vol surface from the implied vol surface, do we interpolate the strikes?
Using the dupire method:
$$\sigma(T, K)=\sqrt{\frac{\sigma_{\mathrm{imp}}^2+2 \sigma_{\mathrm{imp}} T\left(\frac{\partial \sigma_{\mathrm{imp}}}{\partial T}+(r-q) K \frac{\partial \sigma_{\mathrm{imp}}...
- 45
3
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735
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Ill-posed problem: Local volatility calibration. Regularization vs Smoothing
I have asked my question on Mathematics site of Stack Exchange but maybe I will get the answer rather here.
I am working on inverse problem - calibration of local volatility (financial application). ...
2
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125
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Is there daily SPX level data going back to 1927?
While attempting to model the SPX index over time, I found a source here that purportedly has historical daily SPX data going back to 1789 which very likely seems to be backcasted since the ~500 stock ...
- 249
2
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499
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What interpolation methods are standard to use for interpolating on equity volatility surfaces?
The answer to this question (Volatility surface interpolation for Black-Scholes delta hedging) names Cubic Spline Interpolation and Guassian Process interpolation (is this exactly the same thing as ...
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2
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158
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Interpolation of forward zeros-coupons bonds simulations for missing maturities (ESG data)
I have a set of economic scenarios simulated with Barrie and Hibbert ESG. The stochastic model for interest rates used is Libor Market Model Shifted. I am facing a problem with zeros-coupons prices.
...
- 21
2
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173
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Using Market Prices of Bonds to Model the Discount Curve with a Polynomial (Math + R)
I have a small program I'm building to interpolate the discount curve from a portfolio of benchmark bonds. If anyone has any guesses as to whether it's my process, or my code that's messed up I would ...
- 21
2
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108
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Multivariate interpolation for estimating FDM in-between grid points
After implementing some FDM to price some option, there are gaps between our grid points that may be of interest. From reading around, it appears common to use bilinear interpolation to estimate ...
- 133
2
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0
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662
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Funding spread in FVA calculation
For the FVA calculation, is the funding spread (either borrowing or lending) treated as a piecewise constant function (i.e., if the length of the exposure is 5 month and I know the 3 and 6 months ...
- 803
2
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1k
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Interpolate option volatility in delta space in R
I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
- 153
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53
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How to determine a correct interpolation technique for discount factor curves?
I think Log-Linear interpolation of discount factor curve is most preferred. I think this is due to the fact of not having any arbitrages in the forward rates. Can someone share some literature or ...
- 11
1
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159
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Arbitrage-Free implied/local volatility surface with Cubic Spline Interpolation
I am trying to create a local volatility surface using a cubic spline interpolated implied volatility surface. In other words, I have a function $\sigma(T,K)$, that is arbitrage-free $\forall T,K$ (...
1
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0
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108
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Techniques for proxying time series / stock prices
What are some good techniques for proxying time series?
My purpose is for risk management / modelling and I would like proxy to missing series.
Given that I also have to account for volatility, ...
- 548
1
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94
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Dividend adjustment on SABR formula for interpolating implied volatility
We are using a SABR model to interpolate the implied volatility surface.
The model yields a formula for implied volatility that contains the following term:
$\ln \left(\frac{K}{F}\right)$
It is ...
- 863
1
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0
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350
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Practical implementation of Vellekoop-Nieuwenhuis model/interpolation
Have read the 2006 VELLEKOOP-NIEUWENHUIS paper (Efficient Pricing of Derivatives on Assets with Discrete Dividends) (Download) many times re Discrete dividends on American Options, but remain baffled ...
- 11
1
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168
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What is the cause of a "broken" volatility surface?
I am currently working on a project for which I need the implied volatility surfaces, to estimate the value of plain-vanilla European options with different strikes (cannot be observed directly in the ...
- 156
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19
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FX portfolio MV estimation for undelying Spot move
In the context of a project involving FX derivatives, I am faced with the challenge of estimating the change in the market value of my portfolio in response to a change in the underlying spot.
The ...
- 21
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121
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Methods for Constructing a Yield Curve
I wonder if the Raw interpolation (known as linear on the log of discount factors) can handle negative interest rate due to the inverted yield curve?
I understand using the linear on log of rates and ...
0
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0
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38
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Interpolating FRA curves for MPC dates
I have data for all the "white" FRAs with 3m fixings in a given market, i.e., 1x4 up to 9x12 and all the central back MPC meeting dates over the next twelve months.
What is the recommended ...
- 440
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185
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UnivariateSpline Spline Interpolation behaving erratically
I am using univariate spline to interpolate betweeen a number of dots I have (in blue - it is a yield curve). The code is the following:
...
- 59
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76
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Any resources or literature on interpolation schemes for future dates?
I have a whole stack of the popular option trading/modelling books (Natenburg, Sinclair, Hull, etc.) None of them however address the idea of pricing or modelling values at a point in the "future&...
- 113
0
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557
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Interpolation of SVI Implied Volatility in parameter space
I am currently working with a slice-wise SVI parametrisation of the implied volatility surface.
$\sigma^2(x,t) = a_t + b_t (\rho_t (x - m_t) + \sqrt{(x - m_t)^2 + \theta^2})$
Does anyone have ...
- 133
0
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1
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1k
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simple volatility surface interpolation
I'm trying to build an implied vol surface from some listed options. In particular I have data for calls and puts for different strikes and expiries. I'm not looking to price on the interpolated vols ...
- 370