Solving the inverse problem of option pricing based on a black-scholes model using a regularized-gauss-newton method

Yitong Han; Minghui Jiang; Yong Chen; Yixin Dou

Solving the inverse problem of option pricing based on a black-scholes model using a regularized-gauss-newton method

Yitong Han
, Minghui Jiang
, Yong Chen
, Yixin Dou

School of Mathematics

School of Management, Harbin Institute of Technology
Harbin University of Commerce

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

This paper investigates the inverse problem of a stochastic volatility based on the Black-Scholes option pricing model. In order to overcome the ill-posedness of reconstructing a stochastic volatility, a regularized-Gauss-Newton method is applied to solve the inverse problem. Numerical examples show that the reconstruction algorithm is convergence and stable.

Original language	English
Pages (from-to)	415-420
Number of pages	6
Journal	International Journal of Applied Mathematics and Statistics
Volume	51
Issue number	21
State	Published - 2013

Keywords

Black-Scholes model
Ill-posedness
Inverse problem
Option pricing

Cite this

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title = "Solving the inverse problem of option pricing based on a black-scholes model using a regularized-gauss-newton method",

abstract = "This paper investigates the inverse problem of a stochastic volatility based on the Black-Scholes option pricing model. In order to overcome the ill-posedness of reconstructing a stochastic volatility, a regularized-Gauss-Newton method is applied to solve the inverse problem. Numerical examples show that the reconstruction algorithm is convergence and stable.",

keywords = "Black-Scholes model, Ill-posedness, Inverse problem, Option pricing",

author = "Yitong Han and Minghui Jiang and Yong Chen and Yixin Dou",

year = "2013",

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volume = "51",

pages = "415--420",

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T1 - Solving the inverse problem of option pricing based on a black-scholes model using a regularized-gauss-newton method

AU - Han, Yitong

AU - Jiang, Minghui

AU - Chen, Yong

AU - Dou, Yixin

PY - 2013

Y1 - 2013

N2 - This paper investigates the inverse problem of a stochastic volatility based on the Black-Scholes option pricing model. In order to overcome the ill-posedness of reconstructing a stochastic volatility, a regularized-Gauss-Newton method is applied to solve the inverse problem. Numerical examples show that the reconstruction algorithm is convergence and stable.

AB - This paper investigates the inverse problem of a stochastic volatility based on the Black-Scholes option pricing model. In order to overcome the ill-posedness of reconstructing a stochastic volatility, a regularized-Gauss-Newton method is applied to solve the inverse problem. Numerical examples show that the reconstruction algorithm is convergence and stable.

KW - Black-Scholes model

KW - Ill-posedness

KW - Inverse problem

KW - Option pricing

UR - https://www.scopus.com/pages/publications/84896376452

M3 - 文章

AN - SCOPUS:84896376452

SN - 0973-1377

VL - 51

SP - 415

EP - 420

JO - International Journal of Applied Mathematics and Statistics

JF - International Journal of Applied Mathematics and Statistics

IS - 21

ER -

Solving the inverse problem of option pricing based on a black-scholes model using a regularized-gauss-newton method

Abstract

Keywords

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