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Pricing dynamic fund protections for a hyperexponential jump diffusion process

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Listed:
  • Linyi Qian
  • Zhuo Jin
  • Wei Wang
  • Lyu Chen

Abstract

This article deals with the valuation of dynamic fund protections (DFPs) under a jump diffusion model, where the jump size follows a hyperexponential distribution. The closed-form solution of the value of DFP is obtained in terms of Laplace transform. A numerical example is provided to show that the explicit solution is easy to implement by using the Gaver–Stehfest algorithm. Effects of key parameters are analyzed at last. The valuation method developed in this work can be used in pricing various variable annuities and path-dependent financial products.

Suggested Citation

  • Linyi Qian & Zhuo Jin & Wei Wang & Lyu Chen, 2018. "Pricing dynamic fund protections for a hyperexponential jump diffusion process," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 47(1), pages 210-221, January.
    • Handle: RePEc:taf:lstaxx:v:47:y:2018:i:1:p:210-221
    DOI: 10.1080/03610926.2017.1301475
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    References listed on IDEAS

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