Exchange option pricing in jump-diffusion models based on esscher transform |
| |
| Authors: | Wenhan Li Lixia Liu Guiwen Lv Cuixiang Li |
| |
| Institution: | 1. College of Mathematics and Information Science, Hebei Normal University, Shijiazhuang, P. R. China;2. College of Mathematics and Physics, Hebei GEO University, Shijiazhuang, P. R. China;3. Department of Mathematics and Physics, Shijiazhuang Tiedao University, Shijiazhuang, P. R. China |
| |
| Abstract: | In the real world, we introduce a dynamic model about the risky asset which is governed by Brownian motion, stationary compound Poisson process and its compensation process. By choosing Esscher transform parameters, we obtain a risk-neural measure Q under which the discounted value of the risky underlying asset is a martingale. Then, we give the pricing formulas of Exchange option by change of numeraire. At last, we analyze the option pricing formula and provide numerical illustrations by introducing BBY stock and SBUX stock. |
| |
| Keywords: | Change of numeraire Esscher transform Exchange option jump-diffusion model |
|
|
