An Asymptotic Expansion for Solutions of Cauchy-Dirichlet Problem for Second Order Parabolic PDEs and its Application to Pricing Barrier Options
نویسندگان
چکیده
This paper develops a rigorous asymptotic expansion method with its numerical scheme for the Cauchy-Dirichlet problem in second order parabolic partial differential equations (PDEs). As an application, we propose a new approximation formula for pricing a barrier option under a certain type of stochastic volatility model including the log-normal SABR model.
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