Corielli, Francesco ; Pascucci, Andrea
(2007)
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
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.
Document type
Preprint
Creators
Subjects
DOI
Deposit date
19 Feb 2007
Last modified
16 May 2011 12:05
URI
Other metadata
Document type
Preprint
Creators
Subjects
DOI
Deposit date
19 Feb 2007
Last modified
16 May 2011 12:05
URI
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