A comparison of European and Asian options under Markov additive processes

MaRDI QIDQ6322129zbMATH OpenFDO

Authors David Woodford, Larbi Alili

Publication date 15 July 2019

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic models in economics (91B70) Stochastic processes (60G99)

Abstract: We provide results relating to the integrability, uniform integrability and local integrability of exponential MAPs, which are natural extensions of exponential Levy models. Then, we use Mellin transform and partial integro-differential equation methods to value European options under a such a model. Finally, a comparison is made between the price of a European call option and that of an Asian call option.

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