Pricing Financial Derivatives by Gram-Charlier Expansions

In this paper we provide several applications of Gram-Charlier expansions in financial derivative pricing. We first give an exposition on how to calculate swaption prices under a two-factor Cox-Ingersoll-Ross (CIR2) model. Then we apply this method to an extended version of the model (CIR2++). We also develop a procedure to calculate European call options under Heston’s model of stochastic volatility by the Gram-Charlier Expansions.

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Year of publication:	2013-12
Authors:	Yin-Hei (Michael) Cheng ; Wirjanto, Tony S.
Institutions:	Rimini Centre for Economic Analysis (RCEA)

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Extent:	application/pdf
Series:	Working Paper Series.
Type of publication:	Book / Working Paper
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010728018