EconPapers    
Economics at your fingertips  
 

An analytical perturbative solution to the Merton–Garman model using symmetries

Xavier Calmet and Nathaniel Wiesendanger Shaw

Journal of Futures Markets, 2020, vol. 40, issue 1, 3-22

Abstract: In this paper, we introduce an analytical perturbative solution to the Merton–Garman model. It is obtained by doing perturbation theory around the exact analytical solution of a model which possesses a two‐dimensional Galilean symmetry. We compare our perturbative solution of the Merton–Garman model to Monte Carlo simulations and find that our solutions perform surprisingly well for a wide range of parameters. We also show how to use symmetries to build option pricing models. Our results demonstrate that the concept of symmetry is important in mathematical finance.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1002/fut.22061

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:40:y:2020:i:1:p:3-22

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-07-04
Handle: RePEc:wly:jfutmk:v:40:y:2020:i:1:p:3-22