Asymptotics for d -Dimensional Lévy-Type Processes

DOI10.1007/978-3-319-11605-1_12zbMATH Open1418.91525arXiv1404.3153OpenAlexW2108603307MaRDI QIDQ4560337FDOQ4560337

Authors: Matthew Lorig, Stefano Pagliarani, Andrea Pascucci 

Publication date: 11 December 2018

Published in: Springer Proceedings in Mathematics & Statistics (Search for Journal in Brave)

Abstract: We consider a general d-dimensional Levy-type process with killing. Combining the classical Dyson series approach with a novel polynomial expansion of the generator A(t) of the Levy-type process, we derive a family of asymptotic approximations for transition densities and European-style options prices. Examples of stochastic volatility models with jumps are provided in order to illustrate the numerical accuracy of our approach. The methods described in this paper extend the results from Corielli et al. (2010), Pagliarani and Pascucci (2013) and Lorig et al. (2013a) for Markov diffusions to Markov processes with jumps.

Full work available at URL: https://arxiv.org/abs/1404.3153

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zbMATH Keywords

asymptotic approximationintegro-differential equationparametrixLévy processesmulti-dimensional Lévy-type process with killing

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Derivative securities (option pricing, hedging, etc.) (91G20) Asymptotic approximations, asymptotic expansions (steepest descent, etc.) (41A60)

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Cited In (5)

• Precise asymptotic approximations for kernels corresponding to Lévy processes
• Asymptotic behaviour of the distribution density of some Lévy functionals in \(\mathbb R^n\)
• Portfolio optimization under local-stochastic volatility: coefficient Taylor series approximations and implied Sharpe ratio
• Asymptotic expansions for Markov processes with Lévy generators
• Pricing approximations and error estimates for local Lévy-type models with default

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