A New Computational Scheme for Computing Greeks by the Asymptotic Expansion Approach
AbstractWe developed a new scheme for computing "Greeks"of derivatives by an asymptotic expansion approach. In particular, we derived analytical approximation formulae for deltas and Vegas of plain vanilla and av-erage European call options under general Markovian processes of underlying asset prices. Moreover, we introduced a new variance reduction method of Monte Carlo simulations based on the asymptotic expansion scheme. Finally, several numerical examples under CEV processes confirmed the validity of our method.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-366.
Length: 34 pages
Date of creation: Sep 2005
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