A Non-Uniform Bound Approximation of Polya via Poisson, Using Stein-Chen Method and Ω –Function and Its Application in Option Pricing
Journal Title: International Journal of Mathematics and Statistics Invention - Year 2018, Vol 6, Issue 3
Abstract
In this work, the Stein-Chen method and the ω-function associated with Pόlya random variable are used to obtain a non-uniform bound approximation of Pόlya by Poisson in terms of point metric and Pόlya distribution applied in finance. Egege et al[11]found out that the upper bound may not be sufficiently enough for measuring the accuracy of an approximation. Also, it was discovered that the results obtained for nonuniform are better than the results obtained for uniform bound. This is in agreement with Egege et al,[11], that for 𝑛 ≤ 𝑟 , and if the upper bound is small, then a good approximation of Pόlya is obtained. And for n>r , it will not give an appropriate approximation. And Pόlya combined with financial term is used to generate a model for forecasting the price of a European call option. Which gives the same numerical with Osu ,et al[2].
Authors and Affiliations
Samson O. Egege, Bright O. Osu, Chigozie Chibuisi
Keywords
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