We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.
P. Foschi, A. Pascucci, S. Pagliarani (2013). Approximations for Asian options in local volatility models. JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS, 237, 442-459 [10.1016/j.cam.2012.06.015].
Approximations for Asian options in local volatility models
FOSCHI, PAOLO;PASCUCCI, ANDREA;S. Pagliarani
2013
Abstract
We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.File in questo prodotto:
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