European and Asian Greeks for exponential Lévy processes

DOI10.48550/ARXIV.1603.00920zbMATH Open1520.91402arXiv1603.00920MaRDI QIDQ64644FDOQ64644

Ludger Rüschendorf, Anselm Hudde, Ludger Rüschendorf, Anselm Hudde

Publication date: 2 March 2016

Published in: Methodology and Computing in Applied Probability (Search for Journal in Brave)

Abstract: In this paper we give easy-to-implement closed-form expressions for European and Asian Greeks for general L2-payoff functions and underlying assets in an exponential L'evy process model with nonvanishing Brownian motion part. The results are based on Hilbert space valued Malliavin Calculus and extend previous results from the literature. Numerical experiments suggest, that in the case of a continuous payoff function, a combination of Malliavin Monte Carlo Greeks and the finite difference method has a better convergence behavior, whereas in the case of discontinuous payoff functions, the Malliavin Monte Carlo method clearly is the superior method compared to the finite difference approach, for first- and second order Greeks. Reduction arguments from the literature based on measure change imply that the expressions for the Greeks in this paper also hold true for generalized Asian options in particular for fixed and floating strike Asian options.

Full work available at URL: https://arxiv.org/abs/1603.00920

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zbMATH Keywords

Asian Greeksjump diffusionsMalliavin calculus

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic calculus of variations and the Malliavin calculus (60H07) Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.) (60J70) Numerical methods (including Monte Carlo methods) (91G60)

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Cited In (1)

• Moments of integrated exponential Lévy processes and applications to Asian options pricing

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