We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar Lévy-type stochastic processes. We derive rigorous error bounds for the approximate solutions. We also provide numerical examples illustrating the usefulness and versatility of our methods in a variety of financial settings.
Pascucci Andrea, Stefano Pagliarani, Matthew Lorig (2015). Pricing approximations and error estimates for local Lévy-type models with default. COMPUTERS & MATHEMATICS WITH APPLICATIONS, 69, 1189-1219 [10.1016/j.camwa.2015.03.013].
Pricing approximations and error estimates for local Lévy-type models with default
PASCUCCI, ANDREA;Stefano Pagliarani;Matthew Lorig;PAGLIARANI, STEFANO
2015
Abstract
We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar Lévy-type stochastic processes. We derive rigorous error bounds for the approximate solutions. We also provide numerical examples illustrating the usefulness and versatility of our methods in a variety of financial settings.File in questo prodotto:
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