| Article ID: | iaor20091187 |
| Country: | United States |
| Volume: | 2005 |
| Issue: | 3 |
| Start Page Number: | 211 |
| End Page Number: | 235 |
| Publication Date: | Sep 2005 |
| Journal: | Journal of Applied Mathematics and Stochastic Analysis |
| Authors: | Eddahbi M., Sol J.L., Vives J. |
| Keywords: | stochastic processes |
We find a Stroock formula in the setting of generalized chaos expansion introduced by Nualart and Schoutens for a certain class of Lévy processes, using a Malliavin-type derivative based on the chaotic approach. As applications, we get the chaotic decomposition of the local time of a simple Lévy process as well as the chaotic expansion of the price of a financial asset and of the price of a European call option. We also study the behavior of the tracking error in the discrete delta neutral hedging under both the equivalent martingale measure and the historical probability.