Podcast: Callegaro, Fiorin and Grasselli on quantization

High-dimension problems can be solved with discretisation techniques

Risk.net's Nazneen Sherif and Mauro Cesa speaking to the authors via audio link

In this episode of Quantcast, Mauro Cesa and Nazneen Sherif talk with Giorgia Callegaro, Lucio Fiorin and Martino Grasselli, authors of a new paper, American quantized calibration in stochastic volatility.

They introduce a pricing model for European and American-style options with stochastic volatility, applying so-called quantization, a discretisation technique that allows a dimension reduction in the calibration problem.

The technique, borrowed from signal processing analysis, is relatively new to finance, but it is likely to become more widely used. The authors also explain what other computationally demanding problems can be approached with discretisation methods.

What you will find in this podcast:

00:45 An overview of the paper

03:32 What is quantization?

05:25 Potential applications and Google options experiment

08:00 A long-term project

12:06 From the academia to the bank

To hear the full interview, listen in the player above, or download. Future podcasts in our Quantcast series will be uploaded to Risk.net. You can also visit the main page here to access all tracks or go to the iTunes store to listen and subscribe.