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Type	Working Paper
Scope	Discipline-based scholarship
Title	Closed form option pricing under generalized hermite expansions
Organization Unit	Quantitative Finance (Erich Walter Farkas)
Authors	Gabriel Grigore Drimus Ciprian Necula Erich Walter Farkas
Language	English
Institution	University of Zurich
Series Name	SSRN
Number	2349868
ISSN	1556-5068
Number of Pages	15
Date	2013
Abstract Text	In this article, we generalize the classical Edgeworth series expansion used in the option pricing literature. We obtain a closed-form pricing formula for European options by employing a generalized Hermite expansion for the risk neutral density. The main advantage of the generalized expansion is that it can be applied to heavy-tailed return distributions, a case for which the standard Edgeworth expansions are not suitable. We also show how the expansion coefficients can be inferred directly from market option prices.
Related URLs	http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2349868 http://ssrn.com/abstract=2349868
Other Identification Number	merlin-id:9331
PDF File	Download from ZORA
Export	BibTeX EP3 XML (ZORA)
Keywords	European options, generalized Hermite series expansion, calibration