Pricing exotic options using the Wang transform
AbstractThe Wang transform allows for a simple, yet intuitive approach to pricing options with underlying based on geometric Brownian motion. This paper shows how the approach by Hamada and Sherris can be used to price some exotic options. Examples showing the convergence of the Wang price to the Black–Scholes price for a Margrabe option, a geometric basket option and an asset-or-nothing option are given. We also take a look at the range of prices achievable using the Wang transform for these options.
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Bibliographic InfoArticle provided by Elsevier in its journal The North American Journal of Economics and Finance.
Volume (Year): 25 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/620163
Wang transform; Exotic options; Geometric Brownian motion; Choquet pricing;
Find related papers by JEL classification:
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
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