Pricing approximations and error estimates for local Lévy-type models with default

We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar Lévy-type stochastic processes. We derive rigorous error bounds for the approximate solutions. We also provide numerical examples illustrating the usefulness and versatility of our methods in a variety of financial settings.



Titolo: Pricing approximations and error estimates for local Lévy-type models with default
Autori: 
Pagliarani, Stefano
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Data di pubblicazione: 2015
Rivista: 
COMPUTERS & MATHEMATICS WITH APPLICATIONS  
Abstract: We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar Lévy-type stochastic processes. We derive rigorous error bounds for the approximate solutions. We also provide numerical examples illustrating the usefulness and versatility of our methods in a variety of financial settings.
Handle: http://hdl.handle.net/11368/2886119
Digital Object Identifier (DOI): http://dx.doi.org/10.1016/j.camwa.2015.03.013
URL: http://www.sciencedirect.com/science/article/pii/S0898122115001182
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