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

Roman V. Ivanov, Katsunori Ano

Research output: Contribution to journalArticle

7 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 languageEnglish
Pages (from-to)1-16
Number of pages16
JournalReview of Derivatives Research
DOIs
Publication statusAccepted/In press - 2016 Feb 11

Fingerprint

Pricing
Hypergeometric functions
Finance
Option pricing
Foreign exchange
Exchange option
Variance gamma

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)

Cite this

On exact pricing of FX options in multivariate time-changed Lévy models. / Ivanov, Roman V.; Ano, Katsunori.

In: Review of Derivatives Research, 11.02.2016, p. 1-16.

Research output: Contribution to journalArticle

@article{542d4c9b6c15412bab6971aa03bf6ff2,
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.",
keywords = "Foreign-exchange option, Hypergeometric function, Normal-inverse Gaussian process, Pricing, Time-changed L{\'e}vy process, Variance-gamma process",
author = "Ivanov, {Roman V.} and Katsunori Ano",
year = "2016",
month = "2",
day = "11",
doi = "10.1007/s11147-016-9120-4",
language = "English",
pages = "1--16",
journal = "Review of Derivatives Research",
issn = "1380-6645",
publisher = "Springer New York",

}

TY - JOUR

T1 - On exact pricing of FX options in multivariate time-changed Lévy models

AU - Ivanov, Roman V.

AU - Ano, Katsunori

PY - 2016/2/11

Y1 - 2016/2/11

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.

KW - Foreign-exchange option

KW - Hypergeometric function

KW - Normal-inverse Gaussian process

KW - Pricing

KW - Time-changed Lévy process

KW - Variance-gamma process

UR - http://www.scopus.com/inward/record.url?scp=84957691765&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84957691765&partnerID=8YFLogxK

U2 - 10.1007/s11147-016-9120-4

DO - 10.1007/s11147-016-9120-4

M3 - Article

AN - SCOPUS:84957691765

SP - 1

EP - 16

JO - Review of Derivatives Research

JF - Review of Derivatives Research

SN - 1380-6645

ER -