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2009•Mathematics in EconomicsRequires access

EXCHANGE OPTION PRICING ON FRACTIONAL JUMP-DIFFUSIONS

Zhi Fang

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Abstract

The pricing formulas for European exchange option were obtained using insurance actuary pricing methods,where the underlying asset follows a fractional jump-diffusion process with the time-dependent parameters(expected rate,volatility and risk-less rate).These pricing formulas generalize the corresponding European option and European exchange option pricing on jump-diffusions.

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What this paper is about

The pricing formulas for European exchange option were obtained using insurance actuary pricing methods,where the underlying asset follows a fractional jump-diffusion process with the time-dependent parameters(expected rate,volatility and risk-less rate).These pricing formulas generalize the corresponding European option and European exchange option pricing on jump-diffusions.

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Available abstract

The pricing formulas for European exchange option were obtained using insurance actuary pricing methods,where the underlying asset follows a fractional jump-diffusion process with the time-dependent parameters(expected rate,volatility and risk-less rate).These pricing formulas generalize the corresponding European option and European exchange option pricing on jump-diffusions.

Key concepts: Valuation of options, Jump diffusion, Actuary, Jump, Exchange rate, Jump process, Finite difference methods for option pricing, Volatility (finance)

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