Multivariate European option pricing in a Markov-modulated Levy framework

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

卷:317

Article

Deelstra, Griselda¹  Simon, Matthieu¹ 

[1] Univ Libre Bruxelles, Dept Math, Campus Plaine,CP 210, B-1050 Brussels, Belgium

关键词: Regime-switching;    Esscher transform;    Exchange options;    Quanto options;   

DOI  :  10.1016/j.cam.2016.11.040

来源: Elsevier

【 摘 要 】

This paper studies the pricing of some multivariate European options, namely Exchange options and Quanto options, when the risky assets involved are modelled by MarkovModulated Levy Processes (MMLPs). Pricing formulae are based upon the characteristic exponents by using the well known FFT methodology. We study these pricing issues both under a risk neutral martingale measure and the historical measure. The dependence between the asset's components is incorporated in the joint characteristic function of the MMLPs. As an example, we concentrate upon a regime -switching version of the model of Ballotta et al. (2015) in which the dependence structure is introduced in a flexible way. Several numerical examples are provided to illustrate our results. (C) 2016 Elsevier B.V. All rights reserved.

【 授权许可】

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