Seminario interdisciplinare
ore
13:30
presso <i>aula non fissata</i>
We propose a novel method for the analytical approximation in local
volatility models with Lévy jumps. The main result is an expansion
of the characteristic function in a local Lévy model, which
is worked out in the Fourier space by considering the adjoint
formulation of the pricing problem.
Combined with standard Fourier methods, our result provides efficient
and accurate pricing formulae. In the case of Gaussian jumps,
we also derive an explicit approximation of the
transition density of the underlying process by a heat kernel expansion:
the approximation is obtained in two ways, using PIDE techniques
and working in the Fourier space.
Numerical tests confirm the effectiveness of the method.
Il seminario si terra' presso la sala grande
di Prometeia (primo piano accesso da via Marconi)