Journal of Inverse and Ill-posed Problems
Editor-in-Chief: Kabanikhin, Sergey I.
IMPACT FACTOR 2017: 0.941
5-year IMPACT FACTOR: 0.953
CiteScore 2017: 0.91
SCImago Journal Rank (SJR) 2017: 0.461
Source Normalized Impact per Paper (SNIP) 2017: 1.022
Mathematical Citation Quotient (MCQ) 2017: 0.49
On maximum entropy regularization for a specific inverse problem of option pricing
We investigate the applicability of the method of maximum entropy regularization (MER) to a specific nonlinear ill-posed inverse problem (SIP) in a purely time-dependent model of option pricing, introduced and analyzed for an L 2 -setting in . In order to include the identification of volatility functions with a weak pole, we extend the results of [12, 13], concerning convergence and convergence rates of regularized solutions in L 1 , in some details. Numerical case studies illustrate the chances and limitations of (MER) versus Tikhonov regularization (TR) for smooth solutions and solutions with a sharp peak. A particular paragraph is devoted to the singular case of at-the-money options, where derivatives of the forward operator degenerate.
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