Moment equations and Hermite expansion for nonlinear stochastic differential equations with application to stock price models (Q2463649)

The Hermite expansion for nonlinear stochastic differential equations (SDEs) with loading Gaussian term is considered. The expression coefficients are expressed in terms of conditional moments and computed by solving deterministic moment equations. A simulation study for the CEV stock prices is performed using SDE with nonlinear diffusion coefficient and compared with the Euler approach, the Nowman method and the exact ML method using the Feller density.