Journal of Applied Mathematics and Stochastic Analysis
Volume 2005 (2005), Issue 3, Pages 211-235

A Stroock formula for a certain class of Lévy processes and applications to finance

M. Eddahbi,1 J. L. Solé,2 and J. Vives2

1Département de Mathématiques et Infomatique, Faculté des Sciences et Techniques (FSTG), Université Cadi Ayyad, Marrakech BP 549, Morocco
2 Departament de Matemàtiques, Universitat Autònoma de Barcelona, Bellaterra, Barcelona 08193, Spain

Received 23 June 2004

Copyright © 2005 M. Eddahbi et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We find a Stroock formula in the setting of generalized chaos expansion introduced by Nualart and Schoutens for a certain class of Lévy processes, using a Malliavin-type derivative based on the chaotic approach. As applications, we get the chaotic decomposition of the local time of a simple Lévy process as well as the chaotic expansion of the price of a financial asset and of the price of a European call option. We also study the behavior of the tracking error in the discrete delta neutral hedging under both the equivalent martingale measure and the historical probability.