
Open access
Author
Date
2011-04Type
- Journal Article
Abstract
The validity of an approximation formula for European option prices under a general stochastic volatility model is proved in the light of the Edgeworth expansion for ergodic diffusions. The asymptotic expansion is around the Black-Scholes price and is uniform in bounded payoff functions. The result provides a validation of an existing singular perturbation expansion formula for the fast mean reverting stochastic volatility model. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000034748Publication status
publishedExternal links
Journal / series
Electronic Journal of ProbabilityVolume
Pages / Article No.
Publisher
Institute of Mathematical StatisticsSubject
Ergodic diffusion; Fast mean reverting; Implied volatilityMore
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