Asymptotic analysis for stochastic volatility: Edgeworth expansion
The 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.
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, 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, vol. 79(1), pages 117-134, January.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1004.2106. See general information about how to correct material in RePEc.
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.