Work

Pricing Path-Dependent Options with Jump Risk via Laplace Transforms

Year: 2005

Type: article

Abstract: We present analytical solutions for two-dimensional Laplace transforms of barrier option prices, as well as an approximation based on Laplace transforms for the prices of finite-time horizon American options, under a double exponential jump diffusion model. Our numerical results indicate that the method is fast, accurate, and easy to implement without requiring high precision calculations in Laplace inversion.

Source: Institutional Repositories DataBase (IRDB)

DOI: 10.11179/ker.74.1

Authors: Kou, Steven, Petrella, Giovanni, Wang, Hui

Institutions: Columbia University, John Brown University, Brown University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Science Foundation

Awards: Computational Methods in Financial Engineering, Research on Stochastic Processes and Optimization, Stochastic Models in Financial Engineering