Short-time asymptotics for marginal distributions of semimartingales

Details Short-time asymptotics for marginal distributions of semimartingales Short-time asymptotics for marginal distributions of semimartingales

2012-02-06

arxiv.org/abs/1202.1302v1

Mathematics

Probability

Scientific paper

We study the short-time asymptotics of conditional expectations of smooth and non-smooth functions of a (discontinuous) Ito semimartingale; we compute the leading term in the asymptotics in terms of the local characteristics of the semimartingale. We derive in particular the asymptotic behavior of call options with short maturity in a semimartingale model: whereas the behavior of \textit{out-of-the-money} options is found to be linear in time, the short time asymptotics of \textit{at-the-money} options is shown to depend on the fine structure of the semimartingale.

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