Asymptotic analysis for stochastic volatility: Edgeworth expansion
AbstractThe validity of an approximation formula for European option prices under a general stochastic volatility model is proved in the light of the Edgeworth expansion for ergodic diffusions. The asymptotic expansion is around the Black-Scholes price and is uniform in bounded payoff func- tions. The result provides a validation of an existing singular perturbation expansion formula for the fast mean reverting stochastic volatility model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1004.2106.
Date of creation: Apr 2010
Date of revision:
Contact details of provider:
Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March.
- Fitzsimmons, P. J. & Pitman, Jim, 1999. "Kac's moment formula and the Feynman-Kac formula for additive functionals of a Markov process," Stochastic Processes and their Applications, Elsevier, Elsevier, vol. 79(1), pages 117-134, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).
If references are entirely missing, you can add them using this form.