Cliquet option pricing in a jump-diffusion Lévy model
| Autor: | Markus Hess |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2018 |
| Předmět: |
Cliquet option pricing
path-dependent exotic option equity indexed annuity structured product sensitivity analysis Greeks jump-diffusion model Lévy process stochastic differential equation compound Poisson process Fourier transform distribution function Applied mathematics. Quantitative methods T57-57.97 Mathematics QA1-939 |
| Zdroj: | Modern Stochastics: Theory and Applications, Vol 5, Iss 3, Pp 317-336 (2018) |
| Druh dokumentu: | article |
| ISSN: | 2351-6046 2351-6054 40670961 |
| DOI: | 10.15559/18-VMSTA107 |
| Popis: | We investigate the pricing of cliquet options in a jump-diffusion model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a drifted Lévy process entailing a Brownian diffusion component as well as compound Poisson jumps. We also derive representations for the density and distribution function of the emerging Lévy process. In this setting, we infer semi-analytic expressions for the cliquet option price by two different approaches. The first one involves the probability distribution function of the driving Lévy process whereas the second draws upon Fourier transform techniques. With view on sensitivity analysis and hedging purposes, we eventually deduce representations for several Greeks while putting emphasis on the Vega. |
| Databáze: | Directory of Open Access Journals |
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