Hermite polynomial based expansion of European option prices

DOI10.1016/J.JECONOM.2014.01.003MaRDI QIDQ469560zbMATH OpenOpenAlexFDO

Authors Dacheng Xiu

Publication date 11 November 2014

Published in Journal of Econometrics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.jeconom.2014.01.003

zbMATH Keywords

closed-form expansiondouble exponential jumpsmean-reversionoption valuationself-exciting jumps

Mathematics Subject Classification ID

Approximation by polynomials (41A10) Applications of stochastic analysis (to PDEs, etc.) (60H30) Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.) (60J70) Derivative securities (option pricing, hedging, etc.) (91G20)

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Cited in

(29)

• The Jacobi stochastic volatility model
• Testing for mutually exciting jumps and financial flights in high frequency data
• It only takes a few moments to hedge options
• A new delta expansion for multivariate diffusions via the Itô-Taylor expansion
• Solution of option pricing equations using orthogonal polynomial expansion.
• Solving Euler equations via two-stage nonparametric penalized splines
• A data-driven framework for consistent financial valuation and risk measurement
• Maximum likelihood estimation of diffusions by continuous time Markov chain
• Hermite expansion of transition densities and European option prices for multivariate diffusions with jumps
• Nonparametric filtering of conditional state-price densities
• On expansions for the Black-Scholes prices and hedge parameters
• Model-based pricing for financial derivatives
• A non-linear dynamic model of the variance risk premium
• Moment equations and Hermite expansion for nonlinear stochastic differential equations with application to stock price models
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• Double-jump diffusion model for VIX: evidence from VVIX
• On the polynomial-normal model and option pricing
• Explicit form of approximate transition probability density functions of diffusion processes
• A new representation of the risk-neutral distribution and its applications
• Option pricing with orthogonal polynomial expansions
• Closed-form expansion, conditional expectation, and option valuation
• Nonparametric estimates of option prices via Hermite basis functions
• Goodness-of-Fit Test in Multivariate Jump Diffusion Models
• Recursive algorithm for transition density approximation and simulation of diffusion processes
• Itô-Taylor expansion method of European spread option pricing for multivariate diffusions with jumps
• Estimating State Price Densities Implied by American Options
• Nonparametric estimation of fractional option pricing model

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