Approximate pricing of European and Barrier claims in a local-stochastic volatility setting

Weston Barger () and Matthew Lorig ()
Additional contact information
Weston Barger: Department of Applied Mathematics, University of Washington, USA
Matthew Lorig: Department of Applied Mathematics, University of Washington, USA

International Journal of Financial Engineering (IJFE), 2017, vol. 04, issue 02n03, 1-31

Abstract: We derive asymptotic expansions for the prices of a variety of European and barrier-style claims in a general local-stochastic volatility setting. Our method combines Taylor series expansions of the diffusion coefficients with an expansion in the correlation parameter between the underlying asset and volatility process. Rigorous accuracy results are provided for European-style claims. For barrier-style claims, we include several numerical examples to illustrate the accuracy and versatility of our approximations.

Keywords: Barrier claim; local volatility; stochastic volatility; asymptotics (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2424786317500189
Access to full text is restricted to subscribers

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:wsi:ijfexx:v:04:y:2017:i:02n03:n:s2424786317500189

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2424786317500189

Access Statistics for this article

International Journal of Financial Engineering (IJFE) is currently edited by George Yuan

More articles in International Journal of Financial Engineering (IJFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().