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Spectral calibration of exponential Lévy

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We investigate the problem of calibrating an exponential Lévy model based on market prices of vanilla options. We show that this inverse problem is in general severely ill-posed and we derive exact minimax rates of convergence. The estimation procedure we propose is based on the explicit inversion of option price formula in the spectral domain and a cut-off scheme for high frequencies as regularisation.

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Denis Belomestny, Markus Reiß

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Adapt according to the presented license agreement and reference the original author.