"Pricing Basket Options under Local Stochastic Volatility with Jumps"
   This paper develops a new approximation formula for pricing basket options in a local-stochastic volatility model with jumps. In particular, the model admits local volatility functions and jump components in not only the underlying asset price processes, but also the volatility processes. To the best of our knowledge, the proposed formula is the first one which achieves an analytical approximation for the basket option prices under this type of the models. Moreover, some numerical experiments confirm the validity of the method.
Year of publication: |
2014-01
|
---|---|
Authors: | Shiraya, Kenichiro ; Takahashi, Akihiko |
Institutions: | Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics |
Saved in:
freely available
Saved in favorites
Similar items by person
-
"Pricing Multi-Asset Cross Currency Optionss"
Shiraya, Kenichiro, (2012)
-
Shiraya, Kenichiro, (2010)
-
"Price Impacts of Imperfect Collateralization"
Shiraya, Kenichiro, (2014)
- More ...