Error bounds for small jumps of Lévy processes
Year: 2010
Type: preprint
Abstract: The pricing of options in exponential Levy models amounts to the computation of expectations of functionals of Levy processes. In many situations, Monte-Carlo methods are used. However, the simulation of a Levy process with infinite Levy measure generally requires either to truncate small jumps or to replace them by a Brownian motion with the same variance. We will derive bounds for the errors generated by these two types of approximation.
Source: arXiv (Cornell University)
Author: Dia, El Hadj Aly
Institution: Le LAMA
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4311199807