Pricing approximations and error estimates for local Lévy-type models with default. (May 2015)

• Record Type: Journal Article
• Authors: Lorig, Matthew; Pagliarani, Stefano; Pascucci, Andrea
• Is Part Of: Computers & mathematics with applications. Volume 69:issue 10(2015)
• Page Start: 1189
• Page End: 1219
• Publication Date: 2015-05
• Subjects: Electronic data processing -- Periodicals; Mathematics -- Data processing -- Periodicals; 510.28541
• DOI: 10.1016/j.camwa.2015.03.013
• Languages: English
• ISSNs: 0898-1221

Abstract

<abstract xml:lang="en" abstract-type="author" id="a000005"> <title id="st000005">Abstract</title> <sec> <p id="sp000050">We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar Lévy-type stochastic processes. We derive rigorous error bounds for the approximate solutions. We also provide numerical examples illustrating the usefulness and versatility of our methods in a variety of financial settings.</p> </sec> </abstract>