کد مقاله کد نشریه سال انتشار مقاله انگلیسی نسخه تمام متن
978948 933312 2010 14 صفحه PDF دانلود رایگان
عنوان انگلیسی مقاله ISI
Edgeworth expansions of stochastic trading time
موضوعات مرتبط
مهندسی و علوم پایه ریاضیات فیزیک ریاضی
پیش نمایش صفحه اول مقاله
Edgeworth expansions of stochastic trading time
چکیده انگلیسی
Under most local and stochastic volatility models the underlying forward is assumed to be a positive function of a time-changed Brownian motion. It relates nicely the implied volatility smile to the so-called activity rate in the market. Following Young and DeWitt-Morette (1986) [8], we propose to apply the Duru-Kleinert process-cum-time transformation in path integral to formulate the transition density of the forward. The method leads to asymptotic expansions of the transition density around a Gaussian kernel corresponding to the average activity in the market conditional on the forward value. The approximation is numerically illustrated for pricing vanilla options under the CEV model and the popular normal SABR model. The asymptotics can also be used for Monte Carlo simulations or backward integration schemes.
ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Physica A: Statistical Mechanics and its Applications - Volume 389, Issue 16, 15 August 2010, Pages 3179-3192
نویسندگان
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