# Finite Mixture Approximation of CARMA(p,q) Models

@article{Mercuri2020FiniteMA, title={Finite Mixture Approximation of CARMA(p,q) Models}, author={Lorenzo Mercuri and Andrea Perchiazzo and Edit Rroji}, journal={arXiv: Computational Finance}, year={2020} }

In this paper we show how to approximate the transition density of a CARMA(p, q) model driven by means of a time changed Brownian Motion based on the Gauss-Laguerre quadrature. We then provide an analytical formula for option prices when the log price follows a CARMA(p, q) model. We also propose an estimation procedure based on the approximated likelihood density.

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