Analytical approximation of the transition density in a local volatility model

DOI10.2478/s11533-011-0115-yzbMath1246.91137arXiv1510.06084MaRDI QIDQ432231

Andrea Pascucci, Stefano Pagliarani

Publication date: 3 July 2012

Published in: Finance and Stochastics, Central European Journal of Mathematics (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/1510.06084

zbMATH Keywords

transition density; heat kernel expansion; analytical approximation; implied volatility; Black-Scholes formula; Feller process; local volatility; local diffusions; local-stochastic volatility

Mathematics Subject Classification ID

91G60: Numerical methods (including Monte Carlo methods)

60J60: Diffusion processes

91G20: Derivative securities (option pricing, hedging, etc.)

91B26: Auctions, bargaining, bidding and selling, and other market models

60J70: Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.)

35K10: Second-order parabolic equations

35Q91: PDEs in connection with game theory, economics, social and behavioral sciences

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