An analytical perturbative solution to the Merton Garman model using symmetries.

@article{Calmet2019AnAP,
title={An analytical perturbative solution to the Merton Garman model using symmetries.},
author={X. Calmet and N. Shaw},
journal={arXiv: Pricing of Securities},
year={2019}
}

In this paper, we introduce an analytical perturbative solution to the Merton Garman model. It is obtained by doing perturbation theory around the exact analytical solution of a model which possesses a two-dimensional Galilean symmetry. We compare our perturbative solution of the Merton Garman model to Monte Carlo simulations and find that our solutions performs surprisingly well for a wide range of parameters. We also show how to use symmetries to build option pricing models. Our results… Expand