IJPAM: Volume 110, No. 4 (2016)

Title

POLYNOMIAL CHAOS EXPANSION APPROACH
TO MALLIAVIN CALCULUS ANALYSIS OF
BOND OPTIONS SENSITIVITY

Authors

Daniele Marconi
Intern at Allianz Investment Management SE
Königinstrsse 28, 80802, Munich, GERMANY

Abstract

The present paper provides a sensitivity analysis of bond options exploiting the probabilistic properties of Malliavin Calculus and the computational benefits of the Polynomial Chaos Expansion. The purpose is to use the integration by parts formula of Malliavin Calculus in order to obtain the $Greeks$, of a given financial derivative, in a form which is suitable for numerical simulation. In particular, such computations will be performed usign the so called Polynomial Chaos Expansion technique, then comparing obtained results versus those retrieved using both the usual Monte-Carlo approach and the analytical formula.

History

Received: September 25, 2016
Revised: November 3, 2016
Published: November 9, 2016

AMS Classification, Key Words

AMS Subject Classification: 33C90, 41A10, 42A61, 45D05, 60H10, 60H30, 65C30, 91G30, 91B16, 91B60, 91G20
Key Words and Phrases: Malliavin calculus, polynomial chaos expansion, mathematical finance, Greeks, delta hedging, bond options, pricing

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How to Cite?

DOI: 10.12732/ijpam.v110i4.11 How to cite this paper?

Source:
International Journal of Pure and Applied Mathematics
ISSN printed version: 1311-8080
ISSN on-line version: 1314-3395
Year: 2016
Volume: 110
Issue: 4
Pages: 693 -


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