Asymptotics for Greeks under the constant elasticity of variance model
Oleg L. Kritski, Vladimir F. Zalmezh
TL;DR
This paper derives asymptotic formulas for Greeks and the risk-neutral density in the CEV model, aiding in precise hedging and option pricing for financial assets.
Contribution
It provides new asymptotic formulas for Greeks and densities under the CEV model, enhancing hedging and pricing strategies.
Findings
Asymptotic formulas for Greeks are derived under the CEV model.
The results improve the accuracy of option pricing and hedging.
Formulas facilitate the construction of perfect hedges with known behavior.
Abstract
This paper is concerned with the asymptotics for Greeks of European-style options and the risk-neutral density function calculated under the constant elasticity of variance model. Formulae obtained help financial engineers to construct a perfect hedge with known behaviour and to price any options on financial assets.
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Taxonomy
TopicsStochastic processes and financial applications · Financial Risk and Volatility Modeling · Financial Markets and Investment Strategies