American and European options in multi-factor jump-diffusion models, near expiry (Q2271720)
From MaRDI portal
scientific article
Language | Label | Description | Also known as |
---|---|---|---|
English | American and European options in multi-factor jump-diffusion models, near expiry |
scientific article |
Statements
American and European options in multi-factor jump-diffusion models, near expiry (English)
0 references
8 August 2009
0 references
A general formula for the time decay \(\theta\) of contingent claims of European type in multi-factor jump-diffusion models is derived. Using this formula and a put-call parity argument, the limit of the no-exercise region of American options is described and it is shown that, in the presence of jumps, the no-exercise region near expiry can be significantly larger than in the pure Gaussian case. Explicit formulae are derived for the standard call and put options, exchange options, and bond options affine term structure models.
0 references
critical price near expiry
0 references
American puts
0 references
calls
0 references
exchange options
0 references
bond options
0 references
European options near expiry
0 references
jump-diffusions
0 references
affine term structure models
0 references
quadratic term structure models
0 references