arXiv subjects

Cristian Homescu

Publications and source records attributed to Cristian Homescu.

2 recordsLinked to original sources

arXiv2011

Adjoints and Automatic (Algorithmic) Differentiation in Computational Finance

Two of the most important areas in computational finance: Greeks and, respectively, calibration, are based on efficient and accurate computation of a large number of sensitivities. This paper gives an overview of adjoint and automatic differentiation (AD), also known as algorithmic differentiation, techniques to calculate these sensitivities. When compared to finite difference approximation, this approach can potentially reduce the computational cost by several orders of magnitude, with sensitivities accurate up to machine precision. Examples and a literature survey are also provided.

q-fin.CP↗

arXiv2011

Implied Volatility Surface: Construction Methodologies and Characteristics

The implied volatility surface (IVS) is a fundamental building block in computational finance. We provide a survey of methodologies for constructing such surfaces. We also discuss various topics which can influence the successful construction of IVS in practice: arbitrage-free conditions in both strike and time, how to perform extrapolation outside the core region, choice of calibrating functional and selection of numerical optimization algorithms, volatility surface dynamics and asymptotics.

q-fin.CP↗