A Stroock Formula for a Certain Class of Lévy Processes and Applications to Finance
نویسنده
چکیده
We find a Stroock formula in the setting of generalized chaos expansion introduced by Nualart and Schoutens for a certain class of Lévy processes, using aMalliavin-type derivative based on the chaotic approach. As applications, we get the chaotic decomposition of the local time of a simple Lévy process as well as the chaotic expansion of the price of a financial asset and of the price of a European call option.We also study the behavior of the tracking error in the discrete delta neutral hedging under both the equivalent martingale measure and the historical probability.
منابع مشابه
An Introduction to Lévy Processes with Applications in Finance
These notes aim at introducing Lévy processes in an informal and intuitive way. Several important results about Lévy processes, such as the Lévy-Khintchine formula, the Lévy-Itô decomposition and Girsanov’s transformations, are discussed. Applications of Lévy processes in financial modeling are presented and some popular models in finance are revisited from the point of view of Lévy processes.
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