# Questions tagged [numerical-methods]

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### What is an efficient method to find implied volatility?

I have a code that finds the implied volatility using the Newton-Raphson method. I set the number of trial to 1000 but sometimes it fails to converge and doesn't find the result. Is there a better ...
267 views

### Finite Difference method in Matlab for SABR volatility model fails to provide correct option values

Currently, I'm trying to implement a Finite Difference (FD) method in Matlab for my thesis (Quantitative Finance). I implemented the FD method for Black-Scholes already and got correct results. ...
2k views

### How to quickly estimate a lower bound on correlation for a large number of stocks?

I would like to find stock pairs that exhibit low correlation. If the correlation between A and B is 0.9 and the correlation between A and C is 0.9 is there a minimum possible correlation for B and C? ...
2k views

### Reference on Markov chain Monte Carlo method for option pricing?

I have to implement option pricing in c++ using Markov chain Monte Carlo. Is there some paper which describes this in detail so that I can learn from there and implement?
4k views

### Usage of Brownian Bridge?

I was recommended to read something about Brownian Bridge. Could someone familiar with BB give some recommendation? It was mentioned that BB benefits in 2 places BB could reduce the simulation paths,...
3k views

### How to remove outliers in financial times series?

I have a bunch of time series; i need to clean them before modelling. So far I just know the “filtering/smoothing” method : -Ex: moving average methodology (filter the data with a moving average (...
463 views

### What is a cubature scheme?

Ideally an intuitive explanation with an example, please.
1k views

### How to apply quasi-Monte Carlo to path-dependent options?

Following up on my recent question on variance reduction in a Cox-Ingersoll-Ross Monte Carlo simulation, I would like to learn more about using a quasi-random sequence, such as Sobol or Niederreiter, ...
2k views

### Covariance matrix and Cholesky decomposition

I am simulating a spread option with stochastic volatility using Monte Carlo simulation. I have the positive-definite covariance matrix  \rho = \left( \begin{array}{cccc} 1 & \rho_{1,2} & \...
219 views

### SABR PDE spot/forward upper boundary condition implementation

When running my Finite Difference code, I observe something odd. Although implementing a classical (non-reverting) SABR model, I initialized the variables such that it should be equal to Black-...