Title: Finite mixture approximation of CARMA model
Authors: Lorenzo Mercuri - University of Milan (Italy) [presenting]
Abstract: The aim is to show how to approximate the transition density of a CARMA$(p,q)$ model driven by a time changed Brownian motion based on the Laguerre polynomial. We apply this result in two situations. Firstly we derive an analytical formula for option prices when the log price follows a CARMA model. We also propose an estimation procedure based on the approximated likelihood density.