Mathematics – Probability
Scientific paper
2006-05-14
Mathematics
Probability
15 pages, 2 figures, 1 table Minor errors in the numerical expample, fixed
Scientific paper
The authors present a new simple algorithm to approximate weakly stochastic differential equations in the spirit of [1] and [2]. They apply it to the problem of pricing Asian options under the Heston stochastic volatility model, and compare it with other known methods. It is shown that the combination of the suggested algorithm and quasi-Monte Carlo methods makes computations extremely fast. [1] Shigeo Kusuoka, ``Approximation of Expectation of Diffusion Process and Mathematical Finance,'' Advanced Studies in Pure Mathematics, Proceedings of Final Taniguchi Symposium, Nara 1998 (T. Sunada, ed.), vol. 31 2001, pp. 147--165. [2] Terry Lyons and Nicolas Victoir, ``Cubature on Wiener Space,'' Proceedings of the Royal Society of London. Series A. Mathematical and Physical Sciences 460 (2004), pp. 169--198.
Ninomiya Syoiti
Victoir Nicolas
No associations
LandOfFree
Weak approximation of stochastic differential equations and application to derivative pricing 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 Weak approximation of stochastic differential equations and application to derivative pricing, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Weak approximation of stochastic differential equations and application to derivative pricing will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-264749