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

Pagliarani, Stefano;
2015

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.
http://www.sciencedirect.com/science/article/pii/S0898122115001182
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11368/2886119
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