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amin


Total Posts: 288
Joined: Aug 2005
 
Posted: 2019-12-16 11:54
Download Matlab Program for Solution to Density of Stochastic Differential Equations/Fokker-Planck Equation using Transition Probabilities on a Fixed Grid.

Here I have posted a matlab program that calculates the density of stochastic differential equations using transition probabilities. We also introduce forward Ito-Expectation process that calculates the forward expectations of functions of SDE variable using transition probabilities on the same grid. I give an example of calculation of density of a functional of the SDE variable in the form of a dt-integral
given as \int_0^t X(s)^omega ds
We can calculate this dt-integral for quadratic variations associated with a mean reverting volatility process. In the next version, You could do swap like analytics and calculate density of processes like variance swaps and arithmeric asians by specifying forward payoffs since I will explain how to take forward variance that is associated with forward payoffs.
Please check post 839 here: https://lnkd.in/d6sxvgb https://lnkd.in/d6sxvgb
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