Closed form asymptotics for local volatility models

Details Closed form asymptotics for local volatility models Closed form asymptotics for local volatility models

2009-10-13

arxiv.org/abs/0910.2309v2

Economy

Quantitative Finance

Pricing of Securities

30 pages, 10 figures

Scientific paper

We obtain new closed-form pricing formulas for contingent claims when the asset follows a Dupire-type local volatility model. To obtain the formulas we use the Dyson-Taylor commutator method that we have recently developed in [5, 6, 8] for short-time asymptotic expansions of heat kernels, and obtain a family of general closed-form approximate solutions for both the pricing kernel and derivative price. A bootstrap scheme allows us to extend our method to large time. We also perform analytic as well as a numerical error analysis, and compare our results to other known methods.

Affiliated with

Also associated with

No associations

Rating

Closed form asymptotics for local volatility models does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Closed form asymptotics for local volatility models, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Closed form asymptotics for local volatility models will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-640329