Approximation of Non-Lipschitz SDEs by Picard Iterations |
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Authors: | Julien Baptiste Julien Grepat |
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Institution: | PSL National Research, Ceremade, CNRS, Paris-Dauphine University, Paris, France |
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Abstract: | In this article, we propose an approximation method based on Picard iterations deduced from the Doléans–Dade exponential formula. Our method allows to approximate trajectories of Markov processes in a large class, e.g., solutions to non-Lipchitz stochastic differential equation. An application to the pricing of Asian-style contingent claims in the constant elasticity of variance model is presented and compared to other methods of the literature. |
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Keywords: | Pricing European options |
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