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A unified analytical framework for pricing compound exchange options under quanto and stochastic volatility effects

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  • Szabó, Dávid Zoltán

Abstract

This paper develops a unified analytical framework for valuing compound exchange options (ComEx) under quanto effects and stochastic volatility. Under geometric Brownian motion (GBM), we extend the classical Margrabe (1978) and Becsky–Nagy (2025) models by allowing unequal strikes, dividend differentials, and foreign-currency denomination of the inner assets, yielding a closed-form expression based on bivariate normal probabilities.

Suggested Citation

  • Szabó, Dávid Zoltán, 2026. "A unified analytical framework for pricing compound exchange options under quanto and stochastic volatility effects," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325024122
    DOI: 10.1016/j.frl.2025.109163
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    References listed on IDEAS

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