Pricing Derivatives On Two-Dimensional Lévy Processes
Abstract
The aim of this work is to use a duality approach to study the pricing of derivatives depending on two stocks driven by a bidimensional Lévy process. The main idea is to apply Girsanov's Theorem for Lévy processes, in order to reduce the posed problem to a problem with one Lévy driven stock in an auxiliary market, baptized as "dual market". In this way, we extend the results obtained by Gerber and Shiu [5] for two-dimensional Brownian motion.Download Info
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Bibliographic Info
Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 09 (2006)
Issue (Month): 02 ()
Pages: 185-197
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Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
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Related research
Keywords: Lévy processes; optimal stopping; dual market method; derivative pricing;References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- José Fajardo & Ernesto Mordecki, 2008. "Symmetry and Time Changed Brownian Motions," IBMEC RJ Economics Discussion Papers 2008-02, Economics Research Group, IBMEC Business School - Rio de Janeiro.
- José Fajardo & Ernesto Mordecki, 2005. "Duality and Derivative Pricing with Time-Changed Lévy Processes," IBMEC RJ Economics Discussion Papers 2005-12, Economics Research Group, IBMEC Business School - Rio de Janeiro.
- Ernst Eberlein & Antonis Papapantoleon & Albert N. Shiryaev, 2008. "Esscher transform and the duality principle for multidimensional semimartingales," Papers 0809.0301, arXiv.org, revised Nov 2009.
- Ilya Molchanov & Michael Schmutz, 2009. "Exchangeability type properties of asset prices," Papers 0901.4914, arXiv.org, revised Apr 2011.
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