Inverse problem and concentration method of a continuous-in-time financial model

Tarik Chakkour (1) , Emmanuel Frénod (1)

1 LMBA - Laboratoire de Mathématiques de Bretagne Atlantique

In a continuous-in-time model there is the important financial quantity called Loan which can not be determined directly in terms of Algebraic Spending but has a major impact on the financial strategy. In this paper, we use a mathematical framework to discuss an inverse problem of determining the implied Loan Measure from Algebraic Spending Measure when it is possible. In addition, we build a numerical method to concentrate a measure as a sum of Dirac masses.

Domaines: Equations aux dérivées partielles [math.AP]; Analyse numérique [math.NA]

Tarik Chakkour, Emmanuel Frénod. Inverse problem and concentration method of a continuous-in-time financial model. International Journal of Financial Engineering, 2016, ⟨10.1142/S242478631650016X⟩. ⟨hal-01359689⟩