What is calibration in valuation/pricing process
What is calibration in valuation/pricing process?
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While a quant has to value an exotic contract then he looks to the exchange-traded vanillas to provide him some insight in what volatility to utilize. It is calibration.
List the arguments (variables) of which a FX call or put alternative model price is a function. How does the call & put premium change w.r.t. alteration in the arguments?Both call & put options are functions of just six variables: S
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