Parametrix approximations for option prices

Corielli, Francesco ; Pascucci, Andrea (2005) Parametrix approximations for option prices. [Preprint]
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Abstract

We propose the use of a classical tool in PDE theory, the parametrix method, to build approximate solutions to generic parabolic models for pricing and hedging contingent claims. We obtain an expansion for the price of an option using as starting point the classical Black&Scholes formula. The approximation can be truncated to any number of terms and easily computable error measures are available.

Abstract
Document type
Preprint
Creators
CreatorsAffiliationORCID
Corielli, Francesco
Pascucci, Andrea
Keywords
parabolic differential equations, fundamental solution, parametrix method, option pricing, Black snd Scholes theory
Subjects
Area 01 - Scienze matematiche e informatiche > MAT/05 Analisi matematica
Area 13 - Scienze economiche e statistiche > SECS-S/06 Metodi matematici dell'economia e delle scienze attuariali e finanziarie
DOI
10.6092/unibo/amsacta/1093
Deposit date
10 Jun 2005
Last modified
16 May 2011 11:41
URI
https://amsacta.unibo.it/id/eprint/1093

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