The Exponent Expansion: An Effective Approximation of Transition Probabilities of Diffusion Processes and Pricing Kernels of Financial Derivatives

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dc.creatorCapriotti, Luca
dc.date2006-02-15
dc.date.accessioned2026-07-07T12:11:27Z
dc.date.available2026-07-07T12:11:27Z
dc.descriptionA computational technique borrowed from the physical sciences is introduced to obtain accurate closed-form approximations for the transition probability of arbitrary diffusion processes. Within the path integral framework the same technique allows one to obtain remarkably good approximations of the pricing kernels of financial derivatives. Several examples are presented, and the application of these results to increase the efficiency of numerical approaches to derivative pricing is discussed.
dc.description21 pages, 5 figures, to appear in the International Journal of Theoretical and Applied Finance
dc.identifierhttps://arxiv.org/abs/physics/0602107
dc.identifierhttp://arxiv.org/abs/physics/0602107
dc.identifierInternational Journal of Theoretical and Applied Finance, Vol. 9, No. 7 (2006) 1179-1199
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/210223
dc.subjectPhysics and Society
dc.subjectStatistical Mechanics
dc.subjectStatistics Theory
dc.subjectComputational Physics
dc.subjectStatistical Finance
dc.titleThe Exponent Expansion: An Effective Approximation of Transition Probabilities of Diffusion Processes and Pricing Kernels of Financial Derivatives
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