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arXiv · 1610.07838

Sharp Estimates for Geman-Yor Processes and applications to Arithmetic Average Asian options

Gennaro Cibelli·Sergio Polidoro·Francesco Rossi
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Abstract

We prove the existence and pointwise lower and upper bounds for the fundamental solution of the degenerate second order partial differential equation related to Geman-Yor stochastic processes, that arise in models for option pricing theory in finance. Lower bounds are obtained by using repeatedly an invariant Harnack inequality and by solving an associated optimal control problem with quadratic cost. Upper bounds are obtained by the fact that the optimal cost satisfies a specific Hamilton-Jacobi-Bellman equation.

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Gennaro Cibelli, Sergio Polidoro, Francesco Rossi. 2016-10-25. Sharp Estimates for Geman-Yor Processes and applications to Arithmetic Average Asian options. https://arxiv.org/abs/1610.07838

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