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2012 | 10 | 1 | 250-270
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Analytical approximation of the transition density in a local volatility model

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EN
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EN
We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.
Twórcy
Bibliografia
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  • [6] Cheng W., Costanzino N., Liechty J., Mazzucato A., Nistor V., Closed-form asymptotics and numerical approximations of 1D parabolic equations with applications to option pricing, SIAM J. Financial Math., 2011, 2, 901–934 http://dx.doi.org/10.1137/100796832
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  • [14] Foschi P., Pagliarani S., Pascucci A., Black-Scholes formulae for Asian options in local volatility models, preprint available at http://ssrn.com/paper=1898992
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  • [30] Pascucci A., PDE and Martingale Methods in Option Pricing, Bocconi Springer Ser., 2, Springer, Milan, 2011
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Typ dokumentu
Bibliografia
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