A Stroock formula for a certain class of Lévy processes and applications to finance (Q2498178)
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scientific article; zbMATH DE number 5050246
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| English | A Stroock formula for a certain class of Lévy processes and applications to finance |
scientific article; zbMATH DE number 5050246 |
Statements
A Stroock formula for a certain class of Lévy processes and applications to finance (English)
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28 August 2006
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Summary: We find a Stroock formula in the setting of generalized chaos expansion introduced by \textit{D. Nualart} and \textit{W. Schoutens} [Stochastic Processes Appl. 90, No. 1, 109--122 (2000; Zbl 1047.60088)] for a certain class of Lévy processes, using a Malliavin-type derivative based on the chaotic approach. As applications, we get the chaotic decomposition of the local time of a simple Lévy process as well as the chaotic expansion of the price of a financial asset and of the price of a European call option. We also study the behavior of the tracking error in the discrete delta neutral hedging under both the equivalent martingale measure and the historical probability.
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generalized chaos expansion
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Malliavin-type derivative
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local time
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discrete delta neutral hedging
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0.7719072103500366
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0.76335608959198
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0.756933867931366
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0.7558751702308655
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