Analyticity of the Wiener-Hopf factors and valuation of exotic options in L\'evy models
This 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.
|Date of creation:||Nov 2009|
|Date of revision:||Oct 2010|
|Publication status:||Published in Advanced Mathematical Methods for Finance, pp. 223-245, Springer, 2011|
|Contact details of provider:|| Web page: http://arxiv.org/ |
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