2011•International Journal of Financial Markets and DerivativesRequires access

A general method for pricing European exotic options under Lévy processes

Rossella Agliardi

Abstract

A new option pricing formula is presented that unifies several results of the existing literature on exotic option pricing under Lèvy processes and generates new valuation formulas within the Lévy framework. To demonstrate the flexibility of the method a few examples are given and the known Gaussian formulas are obtained as special cases of ours.

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Key concepts: Exotic option, Valuation of options, Valuation (finance), Binomial options pricing model, Lévy process, Economics, Mathematical economics, Trinomial tree