A New Improvement Scheme for Approximation Methods of Probability Density Functions

Akihiko Takahashi and Yukihiro Tsuzuki
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Akihiko Takahashi: Faculty of Economics, University of Tokyo
Yukihiro Tsuzuki: Graduate School of Economics, University of Tokyo

No CIRJE-F-874, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper develops a new scheme for improving an approximation method of a probability density function, which is inspired by the idea in best approximation in an inner product space . Moreover, we applies "Dykstra's cyclic projections algorithm" for its implementation. Numerical examples for application to an asymptotic expansion method in option pricing demonstrate the effectiveness of our scheme under Black-Scholes and SABR models.

Pages: 23 pages
Date: 2013-01
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Citations: View citations in EconPapers (1)

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