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Title: Polynomial programming approach to weak approximation of Lévy-driven stochastic differential equations with application to option pricing
Authors: Kashima, Kenji
Kawai, Reiichiro
First Published: Aug-2009
Presented at: ICROS-SICE International Joint Conference, 2009, 18-21 August 2009, Fukuoka, Japan.
Publisher: Institute of Electrical and Electronics Engineers (IEEE)
Citation: ICCAS-SICE 2009, ICROS-SICE International Joint Conference 2009, Proceedings, 2009, pp. 3902-3907
Abstract: We propose an optimization approach to weak approximation of Levy-driven stochastic differential equations. We employ a mathematical programming framework to obtain numerically upper and lower bound estimates of the target expectation, where the optimization procedure ends up with a polynomial programming problem. An advantage of our approach is that all we need is a closed form of the Levy measure, not the exact simulation knowledge of the increments or of a shot noise representation for the time discretization approximation. We present numerical examples of the computation of the moments, as well as the European call option premium, of the Doleacuteans-Dade exponential model.
ISBN: 978-4-907764-34-0
Version: Post-print
Status: Peer-reviewed
Type: Conference Paper
Rights: Copyright © 2009 the Society of Instrument and Control Engineers (SICE). Deposited with reference to the publisher's archiving policy available on the SHERPA/RoMEO website. Personal use of this material is permitted. Permission from IEEE must be obtained for all other users, including reprinting/ republishing this material for advertising or promotional purposes, creating new collective works for resale or redistribution to servers or lists, or reuse of any copyrighted components of this work in other works.
Appears in Collections:Conference Papers & Presentations, Dept. of Mathematics

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