Work

Mimicking Volatilities under Marginal Constraints via $q_x$-Bass Martingales: A Parallel Computing Approach

Year: 2026

Type: preprint

Abstract: We study the calibration of continuous-time martingale models to observed derivative prices via a dynamic martingale optimal transport problem that penalizes deviations from the volatility of a prescribed reference model. Using $q_x$-Bass martingales, we approximate this problem through a sequence of discrete-time problems and prove that the continuous-time interpolations of their optimizers are asymptotically optimal. Building on the theory of $q_x$-Bass martingales, we develop numerical methods for the discrete-time problems that do not require full marginal distributions at calibration maturities.

Source: arXiv (Cornell University)

DOI: 10.48550/arxiv.2610.31825

Author: Marini, Antonio

Institution: ETH Zurich

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W7223688104

Cites: 18

Cited by:

Related to: 10