Pricing currency derivatives with Markov-modulated Lévy dynamics

DOI10.1016/j.insmatheco.2014.05.005zbMath1403.91352arXiv1402.1953OpenAlexW2034415220MaRDI QIDQ2513442

Robert J. Elliott, Maksym Tertychnyi, Anatoliy Swishchuk

Publication date: 28 January 2015

Published in: Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/1402.1953

zbMATH Keywords

Lévy processesMarkov processesEsscher transformrisk-neutral measureEuropean call optionforeign exchange rate

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of Markov chains and discrete-time Markov processes on general state spaces (social mobility, learning theory, industrial processes, etc.) (60J20) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (6)

Optimal investment of variance-swaps in jump-diffusion market with regime-switching ⋮ Equity-linked annuity pricing with cliquet-style guarantees in regime-switching and stochastic volatility models with jumps ⋮ Quanto option pricing with a jump diffusion process ⋮ An uncertain currency model with floating interest rates ⋮ Exchange option pricing in jump-diffusion models based on esscher transform ⋮ Pricing of European currency options with uncertain exchange rate and stochastic interest rates

Uses Software

• Matlab

Cites Work

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• A Jump-Diffusion Model for Option Pricing
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• LIBOR and swap market models and measures
• A multicurrency extension of the lognormal interest rate market models
• Pricing currency options under two-factor Markov-modulated stochastic volatility models
• Pricing Options Under a Generalized Markov-Modulated Jump-Diffusion Model
• Option pricing when underlying stock returns are discontinuous

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