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The transition density function plays an important role in understanding and explaining the dynamics of the stochastic process. We propose an approach which can be used for the analytic approximation… Click to show full abstract
The transition density function plays an important role in understanding and explaining the dynamics of the stochastic process. We propose an approach which can be used for the analytic approximation of the transition density related to a multi-scale stochastic volatility model. Using perturbation theory, we compute the leading-order term and the first-order correction terms. A numerical test also confirms the effectiveness of the model.
Keywords:
transition density;
analytic approximation;
transition;
density function;
model
Journal Title: Hacettepe Journal of Mathematics and Statistics
Year Published: 2017
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Journal Title: Hacettepe Journal of Mathematics and Statistics
Year Published: 2017
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!