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A New Computational Scheme for Computing Greeks by the Asymptotic Expansion Approach

Author

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  • Matsuoka, Ryosuke

    (Tokyo Marine & Nichido Fire Insurance co., Ltd.)

  • Akihiko Takahashi

    (Faculty of Economics, University of Tokyo)

  • Yoshihiko Uchida

    (Graduate School of Economics, Osaka University)

Abstract

We 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.

Suggested Citation

  • Matsuoka, Ryosuke & Akihiko Takahashi & Yoshihiko Uchida, 2005. "A New Computational Scheme for Computing Greeks by the Asymptotic Expansion Approach," CIRJE F-Series CIRJE-F-366, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2005cf366
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2005/2005cf366.pdf
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    References listed on IDEAS

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