Weak Approximation of Stochastic Differential Equations and Application to Derivative Pricing
AbstractA new, simple algorithm of order 2 is presented to approximate weakly stochastic differential equations. It is then applied to the problem of pricing Asian options under the Heston stochastic volatility model. 2000 Mathematics Subject Classification, 65C30, 65C05.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 15 (2008)
Issue (Month): 2 ()
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- Abdelkoddousse Ahdida & Aur\'elien Alfonsi, 2010. "Exact and high order discretization schemes for Wishart processes and their affine extensions," Papers 1006.2281, arXiv.org, revised Mar 2013.
- Mariko Ninomiya & Syoiti Ninomiya, 2009. "A new higher-order weak approximation scheme for stochastic differential equations and the Runge–Kutta method," Finance and Stochastics, Springer, vol. 13(3), pages 415-443, September.
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- Masahiro Nishiba, 2013. "Pricing Exotic Options and American Options: A Multidimensional Asymptotic Expansion Approach," Asia-Pacific Financial Markets, Springer, vol. 20(2), pages 147-182, May.
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