CIRJE-F-950

"Asymptotic Expansion Approach in Finance"

Author Name

Takahashi, Akihiko

Date

December 2014

Full Paper   PDF file (Brief Summary)
Remarks  Subsequently published in Large Deviations and Asymptotic Methods in Finance, Vol.110, Ch.13, Springer, pp.345-411(67 pages), 2015.
Abstract

This paper provides a survey on an asymptotic expansion approach to valuation and hedging problems in nance. The asymptotic expansion is a widely applicable methodology for analytical approximations of expectations of certain Wiener functionals. Hence not only academic researchers but also practitioners have been applying the scheme to a variety of problems in nance such as pricing and hedging derivatives under high-dimensional stochastic environments. The present note gives an overview of the approach.