Asian option pricing with orthogonal polynomials

Willems, Sander

doi:10.1080/14697688.2018.1526396

Cited by 24 publications

(10 citation statements)

References 48 publications

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“…Both the jump amplitudes and the Poisson jumps are assumed to be independent from the diffusive noise. The purely diffusive LJD specification (i.e.,

ξ = 0

) has appeared in various financial contexts such as stochastic volatility (Barone‐Adesi, Rasmussen, & Ravanelli, 2005; Nelson, 1990), energy markets (Pilipović, 1997), interest rates (Brennan & Schwartz, 1979), and Asian option pricing (Linetsky, 2004; Willems, 2019a). The extension with jumps has not received much attention yet.…”

Section: The Linear Jump‐diffusion Modelmentioning

confidence: 99%

A term structure model for dividends and interest rates

Filipović

Willems

2020

Mathematical Finance

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Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump‐diffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and the dividend paying stock are given in closed form. We present an efficient moment based approximation method for option pricing. In a calibration exercise we show that a parsimonious model specification has a good fit with Euribor interest rate swaps and swaptions, Euro Stoxx 50 Index dividend futures and dividend options, and Euro Stoxx 50 Index options.

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“…Both the jump amplitudes and the Poisson jumps are assumed to be independent from the diffusive noise. The purely diffusive LJD specification (i.e.,

ξ = 0

Section: The Linear Jump‐diffusion Modelmentioning

confidence: 99%

A term structure model for dividends and interest rates

Filipović

Willems

2020

Mathematical Finance

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“…7 Both the jump amplitudes and the Poisson jumps are assumed to be independent from the diffusive noise. The purely diffusive LJD specification (i.e., ξ = 0) has appeared in various financial contexts such as stochastic volatility (Nelson (1990), Barone-Adesi et al (2005)), energy markets (Pilipović (1997)), interest rates (Brennan and Schwartz (1979)), and Asian option pricing (Linetsky (2004), Willems (2018)). The extension with jumps has not received much attention yet.…”

Section: The Linear Jump-diffusion Modelmentioning

confidence: 99%

A Term-Structure Model for Dividends and Interest Rates

Filipović

Willems

2017

SSRN Journal

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Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jumpdiffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and the dividend paying stock are given in closed form. We present an efficient moment based approximation method for option pricing. In a calibration exercise we show that a parsimonious model specification has a good fit with Euribor interest rate swaps and swaptions, Euro Stoxx 50 index dividend futures and dividend options, and Euro Stoxx 50 index options.JEL Classification: C32, G12, G13 MSC2010 Classification: 91B70, 91G20, 91G30

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“…Sun and Chen ( 2015 ) contended that Asian option has a lower premium than standard option. In the Black–Scholes setting, Willems ( 2019 ) derived orthogonal polynomial expansion for the price of a continuous arithmetic Asian option. Under general stochastic asset model, Fusai and Kyriakou ( 2016 ) developed the pricing method of continuous and discrete arithmetic Asian options.…”

Section: Introductionmentioning

confidence: 99%

Asian rainbow option pricing formulas of uncertain stock model

Gao

Liu

2021

Soft Comput

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Asian rainbow option is option on the minimum or the maximum of several average prices. In modern financial market, Asian rainbow option is an effective instrument for asset allocation and risk management. The investor with Asian rainbow option enjoys an entitlement to select a max or min from multiple assets with an exercise price at maturity date. The investor has to defray fee to acquire this right, which raises the option pricing issue. This paper mainly explores the pricing of Asian rainbow option in the uncertain financial environment, in which the underlying assets prices are treated as uncertain processes. Here, the pricing formulas of Asian rainbow option are derived under the condition that stock prices obey uncertain differential equations driven by independent Liu processes. Furthermore, some numerical examples are designed to compute the prices of these options.

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Asian option pricing with orthogonal polynomials

Cited by 24 publications

References 48 publications

A term structure model for dividends and interest rates

A term structure model for dividends and interest rates

A Term-Structure Model for Dividends and Interest Rates

Asian rainbow option pricing formulas of uncertain stock model

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