A uniform asymptotic expansion for stochastic volatility model in pricing multi-asset European options



In this paper, we consider a stochastic volatility model for pricing multi-asset European options that are widely used in the real world, under the assumption that the volatilities are driven by different OU processes. Using the singular perturbation method for multi-parameter and the boundary layer theory, we derive a uniform asymptotic expansion for the option prices, as well as the uniform error estimates. Copyright © 2011 John Wiley & Sons, Ltd.