An asymptotic expansion for local-stochastic volatility with jump models

作者：Shiraya Kenichiro^*; Takahashi Akihiko

来源：STOCHASTICS-AN INTERNATIONAL JOURNAL OF PROBABILITY AND STOCHASTIC REPORTS, 2017, 89(1): 65-88.

DOI：10.1080/17442508.2015.1136630

• Asymptotic expansion
• local volatility
• stochastic volatility
• jump-diffusion

This paper develops an asymptotic expansion method for general stochastic differential equations with jumps and their functions. By applying the method, we derive an explicit approximation formula for pricing options on functions of multiple assets under local-stochastic volatility with jump models. Moreover, we present numerical examples for pricing basket options based on the parameters calibrated to the actual market data, which confirms the validity of our method in practice.

• 出版日期2017