Explicit solutions of the exit problem for a class of Lévy processes; applications to the pricing of double-barrier options

DOI10.1016/J.SPA.2011.09.008zbMATH Open1239.60033arXiv1003.4917OpenAlexW2017696974MaRDI QIDQ765888FDOQ765888

Authors: Sonia Fourati 

Publication date: 22 March 2012

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: Lewis and Mordecki have computed the Wiener-Hopf factorization of a L'evy process whose restriction on $]0,+infty[$ of their L'evy measure has a rational Laplace transform. That allows to compute the distribution of $(X_t,in{f}_{0leqsleqt}{X}_s)$. For the same class of L'evy processes, we compute the distribution of $(X_t,in{f}_{0leqsleqt}{X}_s,su{p}_{0leqsleqt}{X}_s)$ and also the behavior of this triple at certain stopping time, like the first exit time of an interval containing the origin. Some applications to the pricing of double barrier options with or without rebate are evocated.

Full work available at URL: https://arxiv.org/abs/1003.4917

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zbMATH Keywords

fluctuation theoryWiener-Hopf factorizationexit problemsBargmann equationsdouble barrier optionsLévy processes

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Financial applications of other theories (91G80)

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Cited In (9)

• First-passage times of regime switching models
• Barrier options pricing with joint distribution of Gaussian process and its maximum
• Approximating Lévy processes with completely monotone jumps
• Lévy processes, phase-type distributions, and martingales
• Barrier options and touch-and-out options under regular Lévy processes of exponential type
• A note on Wiener-Hopf factorization for Markov additive processes
• On the Wiener-Hopf factorization for Lévy processes with bounded positive jumps
• Double barrier options under Lévy processes
• A simple Wiener-Hopf factorization approach for pricing double-barrier options

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