Multivariate European option pricing in a Markov-modulated Lévy framework
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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 Markov-Modulated Lévy 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.
论文关键词:C02,G13,C63,D52,F31,Regime-switching,Esscher transform,Exchange options,Quanto options
论文评审过程:Received 10 February 2016, Available online 7 December 2016, Version of Record 21 December 2016.
论文官网地址:https://doi.org/10.1016/j.cam.2016.11.040