A recursive pricing formula for a path-dependent option under the constant elasticity of variance diffusion

In this paper, we consider a path-dependent option in finance under the constant elasticity of variance diffusion. We use a perturbation argument and the probabilistic representation (the Feynman–Kac theorem) of a partial differential equation to obtain a complete asymptotic expansion of the option price in a recursive manner based on the Black–Scholes formula and prove rigorously the existence of the expansion with a convergence error.

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Year of publication:	2014
Authors:	Kim, Jeong-Hoon ; Park, Sang-Hyeon
Published in:	Statistics & Probability Letters. - Elsevier, ISSN 0167-7152. - Vol. 94.2014, C, p. 39-47
Publisher:	Elsevier
Subject:	Stochastic differential equation \| Constant elasticity of variance \| Asymptotic expansion \| Lookback option

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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