We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.
Analytical approximation of the transition density in a local volatility model / A. Pascucci; S. Pagliarani. - In: CENTRAL EUROPEAN JOURNAL OF MATHEMATICS. - ISSN 1644-3616. - STAMPA. - 10-1:(2012), pp. 250-270. [10.2478/s11533-011-0115-y]
Analytical approximation of the transition density in a local volatility model
PASCUCCI, ANDREA;S. Pagliarani
2012
Abstract
We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.File in questo prodotto:
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