IDEAS home Printed from https://ideas.repec.org/a/kap/revdev/v13y2010i1p45-73.html
   My bibliography  Save this article

Exchange option pricing under stochastic volatility: a correlation expansion

Author

Listed:
  • F. Antonelli
  • A. Ramponi
  • S. Scarlatti

Abstract

No abstract is available for this item.

Suggested Citation

  • F. Antonelli & A. Ramponi & S. Scarlatti, 2010. "Exchange option pricing under stochastic volatility: a correlation expansion," Review of Derivatives Research, Springer, vol. 13(1), pages 45-73, April.
    • Handle: RePEc:kap:revdev:v:13:y:2010:i:1:p:45-73
    DOI: 10.1007/s11147-009-9043-4
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11147-009-9043-4
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11147-009-9043-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bakshi, Gurdip & Cao, Charles & Chen, Zhiwu, 1997. "Empirical Performance of Alternative Option Pricing Models," Journal of Finance, American Finance Association, vol. 52(5), pages 2003-2049, December.
    2. Stein, Elias M & Stein, Jeremy C, 1991. "Stock Price Distributions with Stochastic Volatility: An Analytic Approach," The Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 727-752.
    3. Roger Lord & Remmert Koekkoek & Dick Van Dijk, 2010. "A comparison of biased simulation schemes for stochastic volatility models," Quantitative Finance, Taylor & Francis Journals, vol. 10(2), pages 177-194.
    4. Elisa Alòs, 2006. "A generalization of the Hull and White formula with applications to option pricing approximation," Finance and Stochastics, Springer, vol. 10(3), pages 353-365, September.
    5. Y. Maghsoodi, 2007. "Exact Solution Of A Martingale Stochastic Volatility Option Problem And Its Empirical Evaluation," Mathematical Finance, Wiley Blackwell, vol. 17(2), pages 249-265, April.
    6. Chung, San-Lin & Wang, Yaw-Huei, 2008. "Bounds and prices of currency cross-rate options," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 631-642, May.
    7. Fischer, Stanley, 1978. "Call Option Pricing when the Exercise Price Is Uncertain, and the Valuation of Index Bonds," Journal of Finance, American Finance Association, vol. 33(1), pages 169-176, March.
    8. Mark Broadie & Özgür Kaya, 2006. "Exact Simulation of Stochastic Volatility and Other Affine Jump Diffusion Processes," Operations Research, INFORMS, vol. 54(2), pages 217-231, April.
    9. Darrell Duffie & Jun Pan & Kenneth Singleton, 2000. "Transform Analysis and Asset Pricing for Affine Jump-Diffusions," Econometrica, Econometric Society, vol. 68(6), pages 1343-1376, November.
    10. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    11. Fabio Antonelli & Sergio Scarlatti, 2009. "Pricing options under stochastic volatility: a power series approach," Finance and Stochastics, Springer, vol. 13(2), pages 269-303, April.
    12. Margrabe, William, 1978. "The Value of an Option to Exchange One Asset for Another," Journal of Finance, American Finance Association, vol. 33(1), pages 177-186, March.
    13. Hull, John C & White, Alan D, 1987. "The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Donghyun & Kim, Geonwoo & Yoon, Ji-Hun, 2022. "Pricing of vulnerable exchange options with early counterparty credit risk," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Len Patrick Dominic M. Garces & Gerald H. L. Cheang, 2020. "A Put-Call Transformation of the Exchange Option Problem under Stochastic Volatility and Jump Diffusion Dynamics," Papers 2002.10194, arXiv.org.
    3. F. Antonelli & A. Ramponi & S. Scarlatti, 2021. "CVA and vulnerable options pricing by correlation expansions," Annals of Operations Research, Springer, vol. 299(1), pages 401-427, April.
    4. Colin Turfus & Alexander Shubert, 2017. "ANALYTIC PRICING OF CoCo BONDS," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 20(05), pages 1-26, August.
    5. Elisa Al`os & Michael Coulon, 2018. "On the optimal choice of strike conventions in exchange option pricing," Papers 1807.05396, arXiv.org.
    6. Kaustav Das & Nicolas Langren'e, 2018. "Closed-form approximations with respect to the mixing solution for option pricing under stochastic volatility," Papers 1812.07803, arXiv.org, revised Oct 2021.
    7. Elisa Alòs & Thorsten Rheinländer, 2015. "Pricing and hedging Margrabe options with stochastic volatilities," Economics Working Papers 1475, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2017.
    8. Alessandro Ramponi, 2022. "Spread Option Pricing in Regime-Switching Jump Diffusion Models," Mathematics, MDPI, vol. 10(9), pages 1-15, May.
    9. Len Patrick Dominic M. Garces & Gerald H. L. Cheang, 2021. "A numerical approach to pricing exchange options under stochastic volatility and jump-diffusion dynamics," Quantitative Finance, Taylor & Francis Journals, vol. 21(12), pages 2025-2054, December.
    10. Lucia Caramellino & Giorgio Ferrari & Roberta Piersimoni, 2011. "Power Series Representations for European Option Prices under Stochastic Volatility Models," Papers 1105.0068, arXiv.org, revised Jun 2011.
    11. Kim, Jeong-Hoon & Park, Chang-Rae, 2017. "A multiscale extension of the Margrabe formula under stochastic volatility," Chaos, Solitons & Fractals, Elsevier, vol. 97(C), pages 59-65.
    12. Gerald H. L. Cheang & Len Patrick Dominic M. Garces, 2020. "Representation of Exchange Option Prices under Stochastic Volatility Jump-Diffusion Dynamics," Papers 2002.10202, arXiv.org.
    13. Geonwoo Kim, 2020. "Valuation of Exchange Option with Credit Risk in a Hybrid Model," Mathematics, MDPI, vol. 8(11), pages 1-11, November.
    14. Kaustav Das & Nicolas Langren'e, 2020. "Explicit approximations of option prices via Malliavin calculus in a general stochastic volatility framework," Papers 2006.01542, arXiv.org, revised Jan 2024.
    15. Gabueva, L.A., 2015. "Developing a Set of Organizational and Economic Measures of Construction Personnel Policy in the Health Ministry of Russian Federation in a Phased Transition of Industry Workers to 'Effective Contract," Published Papers 2307, Russian Presidential Academy of National Economy and Public Administration.
    16. Xin‐Jiang He & Sha Lin, 2023. "Analytically pricing exchange options with stochastic liquidity and regime switching," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(5), pages 662-676, May.
    17. Len Patrick Dominic M. Garces & Gerald H. L. Cheang, 2021. "A Numerical Approach to Pricing Exchange Options under Stochastic Volatility and Jump-Diffusion Dynamics," Papers 2106.07362, arXiv.org.
    18. Pasricha, Puneet & He, Xin-Jiang, 2022. "Skew-Brownian motion and pricing European exchange options," International Review of Financial Analysis, Elsevier, vol. 82(C).
    19. Yijuan Liang & Xiuchuan Xu, 2019. "Variance and Dimension Reduction Monte Carlo Method for Pricing European Multi-Asset Options with Stochastic Volatilities," Sustainability, MDPI, vol. 11(3), pages 1-21, February.
    20. Kim, Geonwoo & Koo, Eunho, 2016. "Closed-form pricing formula for exchange option with credit risk," Chaos, Solitons & Fractals, Elsevier, vol. 91(C), pages 221-227.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    2. Bara Kim & In-Suk Wee, 2014. "Pricing of geometric Asian options under Heston's stochastic volatility model," Quantitative Finance, Taylor & Francis Journals, vol. 14(10), pages 1795-1809, October.
    3. Yijuan Liang & Xiuchuan Xu, 2019. "Variance and Dimension Reduction Monte Carlo Method for Pricing European Multi-Asset Options with Stochastic Volatilities," Sustainability, MDPI, vol. 11(3), pages 1-21, February.
    4. Mark Broadie & Jerome B. Detemple, 2004. "ANNIVERSARY ARTICLE: Option Pricing: Valuation Models and Applications," Management Science, INFORMS, vol. 50(9), pages 1145-1177, September.
    5. Cui, Zhenyu & Lars Kirkby, J. & Nguyen, Duy, 2017. "A general framework for discretely sampled realized variance derivatives in stochastic volatility models with jumps," European Journal of Operational Research, Elsevier, vol. 262(1), pages 381-400.
    6. M. Papi & L. Pontecorvi & C. Donatucci, 2017. "Weighted average price in the Heston stochastic volatility model," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 40(1), pages 351-373, November.
    7. Mariano González-Sánchez & Eva M. Ibáñez Jiménez & Ana I. Segovia San Juan, 2022. "Market and model risks: a feasible joint estimate methodology," Risk Management, Palgrave Macmillan, vol. 24(3), pages 187-213, September.
    8. Aït-Sahalia, Yacine & Li, Chenxu & Li, Chen Xu, 2021. "Closed-form implied volatility surfaces for stochastic volatility models with jumps," Journal of Econometrics, Elsevier, vol. 222(1), pages 364-392.
    9. Henri Bertholon & Alain Monfort & Fulvio Pegoraro, 2006. "Pricing and Inference with Mixtures of Conditionally Normal Processes," Working Papers 2006-28, Center for Research in Economics and Statistics.
    10. Chiang, Min-Hsien & Huang, Hsin-Yi, 2011. "Stock market momentum, business conditions, and GARCH option pricing models," Journal of Empirical Finance, Elsevier, vol. 18(3), pages 488-505, June.
    11. Kozarski, R., 2013. "Pricing and hedging in the VIX derivative market," Other publications TiSEM 221fefe0-241e-4914-b6bd-c, Tilburg University, School of Economics and Management.
    12. Robert Azencott & Yutheeka Gadhyan & Roland Glowinski, 2014. "Option Pricing Accuracy for Estimated Heston Models," Papers 1404.4014, arXiv.org, revised Jul 2015.
    13. João Pedro Vidal Nunes & Tiago Ramalho Viegas Alcaria, 2016. "Valuation of forward start options under affine jump-diffusion models," Quantitative Finance, Taylor & Francis Journals, vol. 16(5), pages 727-747, May.
    14. Roman Horsky & Tilman Sayer, 2015. "Joining The Heston And A Three-Factor Short Rate Model: A Closed-Form Approach," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(08), pages 1-17, December.
    15. Cui, Zhenyu & Kirkby, J. Lars & Nguyen, Duy, 2021. "Efficient simulation of generalized SABR and stochastic local volatility models based on Markov chain approximations," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1046-1062.
    16. Gang Li & Chu Zhang, 2010. "On the Number of State Variables in Options Pricing," Management Science, INFORMS, vol. 56(11), pages 2058-2075, November.
    17. Calvet, Laurent E. & Fearnley, Marcus & Fisher, Adlai J. & Leippold, Markus, 2015. "What is beneath the surface? Option pricing with multifrequency latent states," Journal of Econometrics, Elsevier, vol. 187(2), pages 498-511.
    18. Gonçalo Faria & João Correia-da-Silva, 2014. "A closed-form solution for options with ambiguity about stochastic volatility," Review of Derivatives Research, Springer, vol. 17(2), pages 125-159, July.
    19. Ning Cai & Yingda Song & Nan Chen, 2017. "Exact Simulation of the SABR Model," Operations Research, INFORMS, vol. 65(4), pages 931-951, August.
    20. Kaeck, Andreas, 2013. "Asymmetry in the jump-size distribution of the S&P 500: Evidence from equity and option markets," Journal of Economic Dynamics and Control, Elsevier, vol. 37(9), pages 1872-1888.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:revdev:v:13:y:2010:i:1:p:45-73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.