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Professor Wei Xu, Department of Mathematics, Tongji University, Shanghai, China)
Implied Volatility Surface Construction for Commodity Futures Options Traded in China
The implied volatility for commodity futures options is difficult to calibrate in Chinese market for two reasons. One is that only American style option is traded; the other is the mean reverting property in the commodity price. Existing methods are too expensive to calibrate the implied volatility from market data. In this paper, we propose an intuitive and efficient willow tree method to resolve this problem. The implied volatility surfaces are constructed by the proposed method based on the sugar and soybean meal option daily prices in China. The results demonstrate the efficiency and accuracy of our method.
Friday, March 15, 2019
11 a.m. - 11:50 a.m.
LH3058 (Lazaridis Hall, Room 3058)