In the present paper we study the asymptotic expansion for a Black–Scholes model with small noise stochastic jump-diffusion interest rate. In particular, we consider the case when the small perturbation is due to a general, but small, noise of Lévy type. Moreover, we provide explicit expressions for the involved expansion coefficients as well as accurate estimates on the remainders.
Asymptotic Expansion for a Black Scholes-Model with Small Noise Stochastic Jump-Diffusion Interest Rate
Cordoni, F.
;Di Persio, L.
2021-01-01
Abstract
In the present paper we study the asymptotic expansion for a Black–Scholes model with small noise stochastic jump-diffusion interest rate. In particular, we consider the case when the small perturbation is due to a general, but small, noise of Lévy type. Moreover, we provide explicit expressions for the involved expansion coefficients as well as accurate estimates on the remainders.
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