PhD Project: Local Volatility Inference through Optimal Transport
The celebrated Dupire’s formula allows to infer the local volatility from the knowledge of option’s prices for all strikes and maturities. Options’ prices being available only at discrete times in real markets, this involves some way of interpolating option prices to non-listed maturities, which in turn often leads to unstable local volatilities. The project here is to adopt an alternative approach inspired by Optimal Transport, that directly finds a local volatility surface compatible with option prices given at discrete maturities. The project consists of a theoretical study followed by the numerical implementation of the model.
Keywords: Local volatility models, Optimal Transport, Stochastic Control, Nonlinear PDE’s.
Applications can be made by selecting the below link.
Please attach supporting documentation including a covering letter outlining why you would like to undertake the PhD project and a current CV including 2 referees. Please note that more than one application can be made if you wish to be considered for more than one PhD project.