Short-time asymptotics for marginal distributions of semimartingales

Amel Bentata and Rama Cont

Papers from arXiv.org

Abstract: We study the short-time asymptotics of conditional expectations of smooth and non-smooth functions of a (discontinuous) Ito semimartingale; we compute the leading term in the asymptotics in terms of the local characteristics of the semimartingale. We derive in particular the asymptotic behavior of call options with short maturity in a semimartingale model: whereas the behavior of \textit{out-of-the-money} options is found to be linear in time, the short time asymptotics of \textit{at-the-money} options is shown to depend on the fine structure of the semimartingale.

Date: 2012-02
New Economics Papers: this item is included in nep-ets
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1202.1302

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