An Efficient Unified Approach for Spread Option Pricing in a Copula Market Model
In this study, we propose a new formula for spread option pricing with the dependence of two assets described by a copula function. The advantage of the proposed method is that it requires only the numerical evaluation of a one-dimensional integral. Any univariate stock price process, admitting an affine characteristic function, can be used in our formula to get an efficient numerical procedure for computing spread option prices. In the numerical analysis we present a comparison with Monte Carlo simulation methods to assess the performance of our approach, assuming that the univariate stock price follows three widely applied models: Variance Gamma, Heston's Stochastic Volatility and Affine Heston Nandi GARCH(1,1) model.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Pricing Exchange Option Based on Copulas by MCMC Algorithm
This paper focus on pricing exchange option based on copulas by MCMC algorithm. Initially, we introduce the methodologies concerned about risk-netural pricing, copulas and MCMC algorithm. After the basic knowledge, we co…
Pricing spread option with liquidity adjustments
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct i…
Pricing multivariate european equity option using gaussian mixture distributions and evt-based copulas
In this article, we present an approach which allows to take into account the effect of extreme values in the modeling of financial asset returns and in the valorisation of associeted options. Specifically, the marginal …
From the Samuelson Volatility Effect to a Samuelson Correlation Effect: Evidence from Crude Oil Calendar Spread Options
We introduce a multi-factor stochastic volatility model based on the CIR/Heston stochastic volatility process. In order to capture the Samuelson effect displayed by commodity futures contracts, we add expiry-dependent ex…
Basket Options with Volatility Skew: Calibrating a Local Volatility Model by Sample Rearrangement
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We descr…