Tag: asymptotic expansion

A rich selection of liquidly traded vanilla and exotic contracts are used in modern nancial markets, depending on a large number of underlying ones. The clear valuation of novel and current derivative contracts to rule out arbitrage opportunities is a key requirement in such dense markets. The implementation of a new approach for pricing contingent claims is based on an asymptotic extension of the dynamics of pricing density. In a chosen coordinate frame, in which the price density looks stationary, … Continue reading “A Study on Asymptotic Expansion of the Risk-Neutral Pricing Density”