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arXiv · 1304.1849

Pricing approximations and error estimates for local L\'evy-type models with default

Matthew Lorig·Stefano Pagliarani·Andrea Pascucci
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Abstract

We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar L\'evy-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.

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Matthew Lorig, Stefano Pagliarani, Andrea Pascucci. 2013-04-06. Pricing approximations and error estimates for local L\'evy-type models with default. https://arxiv.org/abs/1304.1849

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