Polynomial processes and their applications to mathematical finance
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Publication:693032
DOI10.1007/S00780-012-0188-XzbMATH Open1270.60079arXiv0812.4740OpenAlexW2063724955MaRDI QIDQ693032FDOQ693032
Authors: Christa Cuchiero, Martin Keller-Ressel, Josef Teichmann 
Publication date: 7 December 2012
Published in: Finance and Stochastics (Search for Journal in Brave)
Abstract: We introduce a class of Markov processes, called -polynomial, for which the calculation of (mixed) moments up to order only requires the computation of matrix exponentials. This class contains affine processes, processes with quadratic diffusion coefficients, as well as L'evy-driven SDEs with affine vector fields. Thus, many popular models such as exponential L'evy models or affine models are covered by this setting. The applications range from statistical GMM estimation procedures to new techniques for option pricing and hedging. For instance, the efficient and easy computation of moments can be used for variance reduction techniques in Monte Carlo methods.
Full work available at URL: https://arxiv.org/abs/0812.4740
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