Python implementation (incomplete) of the paper Bass Construction with Multi-Marginals: Lightspeed Computation in a New Local Volatility Model . Only the basic local volatility model is implemented. Tested with analytical marginals from the Black-Scholes model (see demo. You can find some logs of the development process in dev notebook with debugging plots. Issues and pull requests are welcome.
Current issues:
- Fixed-point iteration (equation (2) in the paper) is divergent now for tenors > 10. Even for Black-Scholes marginals the solution is visibly inaccurate (see demo).
- Interpolations and inverse CDFs definetely can be improved.