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 | |
| 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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Cite this
Ivanov, R. V., & Ano, K. (Accepted/In press). On exact pricing of FX options in multivariate time-changed Lévy models. Review of Derivatives Research, 1-16. https://doi.org/10.1007/s11147-016-9120-4