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.
Pricing approximations and error estimates for local Lévy-type models with default / Lorig, Matthew; Pagliarani, Stefano; Pascucci, Andrea. - In: COMPUTERS & MATHEMATICS WITH APPLICATIONS. - ISSN 0898-1221. - STAMPA. - 69(2015):10(2015), pp. 1189-1219. [10.1016/j.camwa.2015.03.013]
Pricing approximations and error estimates for local Lévy-type models with default
Pagliarani, Stefano;
2015-01-01
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.| File | Dimensione | Formato | |
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Pricing approximations and error estimates for local Levy-type models with default.pdf
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