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Normal approximation for call function via Stein’s method

Author

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  • Suporn Jongpreechaharn
  • Kritsana Neammanee

Abstract

A Collateralized dept Obligation (CDO) is a cause of the Hamburger crisis in the USA. We use call function for pricing the CDO. In this paper, we first give uniform and non uniform bounds on normal approximation for the call function without correction term. In this part, we assume that the third and fourth moments of random variables exist, respectively. Second, we present uniform and non uniform bounds on normal approximation for the call function with a correction term under the assumption that the sixth moments of random variables is finite. Our techniques are Stein’s method and the zero bias transformation.

Suggested Citation

  • Suporn Jongpreechaharn & Kritsana Neammanee, 2019. "Normal approximation for call function via Stein’s method," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 48(14), pages 3498-3517, July.
    • Handle: RePEc:taf:lstaxx:v:48:y:2019:i:14:p:3498-3517
    DOI: 10.1080/03610926.2018.1476716
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