Black-Scholes formulae for Asian options in local volatility models
AbstractWe develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.
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Bibliographic InfoPaper provided by Department of Statistics, University of Bologna in its series Quaderni di Dipartimento with number 7.
Date of creation: 2011
Date of revision:
Asian Options; Degenerate Diffusion Processes; Transition Density Functions; Analytic Approximations; Option Pricing;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-29 (All new papers)
- NEP-CWA-2011-08-29 (Central & Western Asia)
- NEP-SEA-2011-08-29 (South East Asia)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Stefano, Pagliarani & Pascucci, Andrea & Candia, Riga, 2011. "Expansion formulae for local Lévy models," MPRA Paper 34571, University Library of Munich, Germany.
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