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Asymptotic Methods for Stochastic Volatility Option Pricing: An Explanatory StudyChen, Lichen 13 January 2011 (has links)
In this project, we study an asymptotic expansion method for solving stochastic volatility European option pricing problems. We explain the backgrounds and details associated with the method. Specifically, we present in full detail the arguments behind the derivation of the pricing PDEs and detailed calculation in deriving asymptotic option pricing formulas using our own model specifications. Finally, we discuss potential difficulties and problems in the implementation of the methods.
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