Analyticity of the Wiener-Hopf factors and valuation of exotic options in L\'evy models
AbstractThis paper considers the valuation of exotic path-dependent options in L\'evy models, in particular options on the supremum and the infimum of the asset price process. Using the Wiener--Hopf factorization, we derive expressions for the analytically extended characteristic function of the supremum and the infimum of a L\'evy process. Combined with general results on Fourier methods for option pricing, we provide formulas for the valuation of one-touch options, lookback options and equity default swaps in L\'evy models.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 0911.0373.
Date of creation: Nov 2009
Date of revision: Oct 2010
Publication status: Published in Advanced Mathematical Methods for Finance, pp. 223-245, Springer, 2011
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
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