English

Correlators of Polynomial Processes

Probability 2021-04-26 v3 Statistics Theory Computational Finance Mathematical Finance Statistics Theory

Abstract

In the setting of polynomial jump-diffusion dynamics, we provide an explicit formula for computing correlators, namely, cross-moments of the process at different time points along its path. The formula appears as a linear combination of exponentials of the generator matrix, extending the well-known moment formula for polynomial processes. The developed framework can, for example, be applied in financial pricing, such as for path-dependent options and in a stochastic volatility models context. In applications to options, having closed and compact formulations is attractive for sensitivity analysis and risk management, since Greeks can be derived explicitly.

Keywords

Cite

@article{arxiv.1906.11320,
  title  = {Correlators of Polynomial Processes},
  author = {Fred Espen Benth and Silvia Lavagnini},
  journal= {arXiv preprint arXiv:1906.11320},
  year   = {2021}
}
R2 v1 2026-06-23T10:04:43.735Z