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Fakultät für Mathematik
Hein, Torsten; Hofmann, Bernd : On the inverse problem of option pricing in the time-dependent case

Hein, Torsten ; Hofmann, Bernd : On the inverse problem of option pricing in the time-dependent case


Author(s):
Hein, Torsten
Hofmann, Bernd
Title:
On the inverse problem of option pricing in the time-dependent case
Electronic source:
application/pdf
Preprint series:
Technische Universität Chemnitz, Fakultät für Mathematik (Germany). Preprint 1, 2003
Mathematics Subject Classification:
35R30 [ Inverse problems for PDE ]
91B24 [ Price theory and market structure ]
47H30 [ Particular nonlinear operators ]
65J20 [ Improperly posed problems; regularization ]
Abstract:
The paper analyses specific forward and inverse problems of option pricing for the purely time-dependent case. It gives some insight concerning the role of smoothness and no arbitrage of option data for the identification of volatility term-structure. Well-posed and ill-posed situations are distinguished and illustrated by numerical case studies.
Keywords:
inverse problems, option pricing, Nemytskii operator, Black-Scholes model, well-posedness, ill-posedness, numerical differentiation
Language:
English
Publication time:
5 / 2003

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