Computations of Greeks in a market with jumps via the Malliavin calculus

Youssef El-Khatib and Nicolas Privault

Finance and Stochastics, 2004, vol. 8, issue 2, 179 pages

Abstract: Using the Malliavin calculus on Poisson space we compute Greeks in a market driven by a discontinuous process with Poisson jump times and random jump sizes, following a method initiated on the Wiener space in [5]. European options do not satisfy the regularity conditions required in our approach, however we show that Asian options can be considered due to a smoothing effect of the integral over time. Numerical simulations are presented for the Delta and Gamma of Asian options, and confirm the efficiency of this approach over classical finite difference Monte-Carlo approximations of derivatives. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Greeks; market with jumps; Asian options; Poisson process; Malliavin calculus (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00780-003-0111-6

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