A recursive pricing formula for a path-dependent option under the constant elasticity of variance diffusion

Jeong-Hoon Kim, Sang Hyeon Park

Research output: Contribution to journalArticle

Abstract

In this paper, we consider a path-dependent option in finance under the constant elasticity of variance diffusion. We use a perturbation argument and the probabilistic representation (the Feynman-Kac theorem) of a partial differential equation to obtain a complete asymptotic expansion of the option price in a recursive manner based on the Black-Scholes formula and prove rigorously the existence of the expansion with a convergence error.

Original languageEnglish
Pages (from-to)39-47
Number of pages9
JournalStatistics and Probability Letters
Volume94
DOIs
Publication statusPublished - 2014 Jan 1

Fingerprint

Pricing
Elasticity
Black-Scholes Formula
Path
Dependent
Finance
Asymptotic Expansion
Partial differential equation
Perturbation
Theorem
Partial differential equations
Black-Scholes formula
Option prices
Asymptotic expansion
Path-dependent options

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Statistics, Probability and Uncertainty

Cite this

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A recursive pricing formula for a path-dependent option under the constant elasticity of variance diffusion. / Kim, Jeong-Hoon; Park, Sang Hyeon.

In: Statistics and Probability Letters, Vol. 94, 01.01.2014, p. 39-47.

Research output: Contribution to journalArticle

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