Cutting Edge introduction: Continuity error

Continuity error

bridge-the-gap

Opinion was divided when Jesper Andreasen and Brian Huge – quants at Danske Bank in Copenhagen – unveiled a radical way to generate implied volatilities in two 2011 articles (Risk March 2011, pages 76–79, and Risk July 2011, pages 66–71). On the one hand, the new method promised arbitrage-free prices, but it did so by abandoning the continuous time model that is traditionally seen as the ideal.

Andreasen has been disarmingly blunt about this sacrifice. “I don’t care,” he told one audience member

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: