Normal approximation for call function via Stein's method

A Collateralized dept Obligation (CDO) is a cause of the Hamburger crisis in the USA. We use call function for pricing the CDO. In this paper, we first give uniform and non uniform bounds on normal approximation for the call function without correction term. In this part, we assume that the third an...

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Bibliographic Details
Published inCommunications in statistics. Theory and methods Vol. 48; no. 14; pp. 3498 - 3517
Main Authors Jongpreechaharn, Suporn, Neammanee, Kritsana
Format Journal Article
LanguageEnglish
Published Philadelphia Taylor & Francis 18.07.2019
Taylor & Francis Ltd
Subjects
Approximation
Call function
CDO pricing
Mathematical analysis
Mathematics Subject Classification 60F05
Random variables
Stein's method
Zero bias transformation
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Summary:A Collateralized dept Obligation (CDO) is a cause of the Hamburger crisis in the USA. We use call function for pricing the CDO. In this paper, we first give uniform and non uniform bounds on normal approximation for the call function without correction term. In this part, we assume that the third and fourth moments of random variables exist, respectively. Second, we present uniform and non uniform bounds on normal approximation for the call function with a correction term under the assumption that the sixth moments of random variables is finite. Our techniques are Stein's method and the zero bias transformation.
Bibliography:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
ISSN:0361-0926
1532-415X
DOI:10.1080/03610926.2018.1476716