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Chapter 13 Computational Tools It is the aim of this chapter to introduce computational tools, which can be used to implement functionals presented in this book. In particular, we focus on the non- central chi-squared distribution, which appeared in the context of the MMM and the TCEV model, and the non-central beta distribution, which appeared in the context of pricing exchange options. Lastly, we discuss the inversion of Laplace transforms, which can be used to recover transition densities from the Laplace transforms. 13.1 Some Identities Related to the Non-central Chi-Squared Distribution The non-central chi-squared distribution featured prominently when pricing Euro- pean call and put options under the MMM and TCEV model, see Sect. 3.3. In the current section, we recall the distribution, and in Sect. 13.2 we will present an algo- rithm showing how to implement the distribution, where we follow ideas presented in Hulley (2009). First, we recall the link between the squared Bessel process and the non-central chi-squared distribution, which is given by Xt d 2 x , = χδ t t where X = {Xt , t ≥ 0} denotes a squared Bessel process of dimension δ, and χ2 (λ) δ denotes a non-central chi-squared random variable with δ degrees of freedom and non-centrality parameter λ 0. We recall from Lemma 8.2.2 that the non-central χ2 -distribution with δ 0 degrees of freedom and non-centrality parameter λ 0 has the density function δ 1 p(x, δ, λ) = 1 exp −x + λ x 4 − 2 I δ − 1 (√λx), x ≥ 0. (13.1.1) 2 2 λ 2 2 J. Baldeaux, E. Platen, Functionals of Multidimensional Diffusions with Ap