On exact pricing of FX options in multivariate time-changed Lévy models

Roman V. Ivanov; Katsunori Ano

doi:10.1007/s11147-016-9120-4

On exact pricing of FX options in multivariate time-changed Lévy models

Roman V. Ivanov, Katsunori Ano

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

In this paper we discuss foreign-exchange option pricing in conditionally Gaussian models, namely in the variance-gamma and in the normal-inverse Gaussian models. It happens that in the both models closed-form pricing is attainable. The used method developes the one of the work by Madan et al. (Eur Finance Rev 2:79–105, 1998) where the price of the European call is primarily derived. The obtained formulas are based on values of the Gauss and the Appell hypergeometric functions.

Original language	English
Pages (from-to)	1-16
Number of pages	16
Journal	Review of Derivatives Research
DOIs	https://doi.org/10.1007/s11147-016-9120-4
Publication status	Accepted/In press - 2016 Feb 11

Keywords

Foreign-exchange option
Hypergeometric function
Normal-inverse Gaussian process
Pricing
Time-changed Lévy process
Variance-gamma process

ASJC Scopus subject areas

Finance
Economics, Econometrics and Finance (miscellaneous)

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10.1007/s11147-016-9120-4

Cite this

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title = "On exact pricing of FX options in multivariate time-changed L{\'e}vy models",

abstract = "In this paper we discuss foreign-exchange option pricing in conditionally Gaussian models, namely in the variance-gamma and in the normal-inverse Gaussian models. It happens that in the both models closed-form pricing is attainable. The used method developes the one of the work by Madan et al. (Eur Finance Rev 2:79–105, 1998) where the price of the European call is primarily derived. The obtained formulas are based on values of the Gauss and the Appell hypergeometric functions.",

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AU - Ano, Katsunori

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N2 - In this paper we discuss foreign-exchange option pricing in conditionally Gaussian models, namely in the variance-gamma and in the normal-inverse Gaussian models. It happens that in the both models closed-form pricing is attainable. The used method developes the one of the work by Madan et al. (Eur Finance Rev 2:79–105, 1998) where the price of the European call is primarily derived. The obtained formulas are based on values of the Gauss and the Appell hypergeometric functions.

AB - In this paper we discuss foreign-exchange option pricing in conditionally Gaussian models, namely in the variance-gamma and in the normal-inverse Gaussian models. It happens that in the both models closed-form pricing is attainable. The used method developes the one of the work by Madan et al. (Eur Finance Rev 2:79–105, 1998) where the price of the European call is primarily derived. The obtained formulas are based on values of the Gauss and the Appell hypergeometric functions.

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KW - Hypergeometric function

KW - Normal-inverse Gaussian process

KW - Pricing

KW - Time-changed Lévy process

KW - Variance-gamma process

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SN - 1380-6645

ER -

On exact pricing of FX options in multivariate time-changed Lévy models

Abstract

Keywords

ASJC Scopus subject areas

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