Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1142068 | Operations Research Letters | 2016 | 8 Pages |
Abstract
The Basic Affine Jump Diffusion (BAJD) process is widely used in financial modeling. In this paper, we develop an exact analytical representation for its transition density in terms of a series expansion that is uniformly-absolutely convergent on compacts. Computationally, our formula can be evaluated to high level of accuracy by easily adding new terms which are given explicitly. Furthermore, it can be easily generalized to give an analytical expression for the transition density of the subordinate BAJD process which is more realistic than the BAJD process, while existing approaches cannot.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Discrete Mathematics and Combinatorics
Authors
Lingfei Li, Rafael Mendoza-Arriaga, Daniel Mitchell,