Local Volatility Model: Implementation
Document ID: 2004-59 (previously 2004/009)
Published on: 1st December 2004
Author: Steven Morrison
The local volatility model extends the standard lognormal (fixed volatility) equity model by allowing volatility to be a function of both time and equity price. This note describes the technical detail of the model - both in terms of the mathematics, and the ESG implementation. Examples of the results from the model are provided. Technical note 2004/008 provides a high level overview of this model.
