An approximate Malliavin weight for Variance Gamma process: Sensitivity analysis of European style options Original Research Article

The main objective of this work is to find an approximate Malliavin weight in order to calculate the delta of European style options where the underlying asset is modelled by a Variance Gamma process. We use a Malliavin integration by parts formula for a compound Poisson process. In order to apply this formula, a compound Poisson approximation of the Variance Gamma process is used. We calculate deltas using Monte Carlo simulations. An acceptance–rejection algorithm is used to generate random numbers for the approximated VG process.