Multi-Asset Option Pricing with Exponential L\'evy Processes and the Mellin Transform
AbstractExponential L\'evy processes have been used for modelling financial derivatives because of their ability to exhibit many empirical features of markets. Using their multidimensional analogue, a general analytic pricing formula is obtained, allowing for the direct valuation of multi-asset options on $n \in \z^+$ risky assets. By providing alternate expressions for multi-asset option payoffs, the general pricing formula can reduce to many popular cases, including American basket options which are considered herein. This work extends previous results of basket options to dimensions $n \geq 3$ and more generally, to payoff functions that satisfy Lipschitz continuity.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1309.3035.
Date of creation: Sep 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-26 (All new papers)
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- Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
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