Path dependent option pricing under Lévy processes applied to Bermudan options
|Title:||Path dependent option pricing under Lévy processes applied to Bermudan options||Authors:||O'Sullivan, Conall||Permanent link:||http://hdl.handle.net/10197/1192||Date:||Dec-2004||Abstract:||A model is developed that can price path dependent options when the underlying process is an exponential Lévy process with closed form conditional characteristic function. The model is an extension of a recent quadrature option pricing model so that it can be applied with the use of Fourier and Fast Fourier transforms. Thus the model possesses nice features of both Fourier and quadrature option pricing techniques since it can be applied for a very general set of underlying Lévy processes and can handle exotic path dependent features. The model is applied to European and Bermudan options for geometric Brownian motion, a jump-diffusion process, a variance gamma process and a normal inverse Gaussian process. However it must be noted that the model can also price other path dependent exotic options such as lookback and Asian options.||Type of material:||Working Paper||Publisher:||University College Dublin. School of Business. Centre for Financial Markets||Copyright (published version):||2004, Centre for Financial Markets||Keywords:||Fast Fourier transform; Path dependent option pricing; Recursive||Subject LCSH:||Options (Finance)--Mathematical models
|Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Centre for Financial Markets Working Papers|
Show full item record
Page view(s) 10178
This item is available under the Attribution-NonCommercial-NoDerivs 3.0 Ireland. No item may be reproduced for commercial purposes. For other possible restrictions on use please refer to the publisher's URL where this is made available, or to notes contained in the item itself. Other terms may apply.