Raúl Merino has been working full-time for more than a decade in the industry as Risk Quant. Raúl is also an Associate Professor at the Universitat Pompeu Fabra (UPF). He has a Master's degree in Mathematics for Financial Instruments from the Universitat Autònoma de Barcelona (UAB) and the Centre de Recerca Matemàtica (CRM), and a Diploma of Advanced Studies in Quantitative Economics from the Universidad Nacional de Educación a Distancia (UNED). Currently, he is pursuing a PhD on the use of the decomposition formula in stochastic volatility models under the supervision of Josep Vives at the Universitat de Barcelona (UB). His research interests are in stochastic analysis and applied mathematics, with a special focus on applications to mathematical finance.
In the present paper, a decomposition formula for the call price due to Alòs is transformed into a Taylor-type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the decomposition of…