Pricing of European Basket Call Option under Exponential Ornstein-Uhlenbeck Process
Pricing of Securities
2015-06-05 v3 Probability
Mathematical Finance
Abstract
Pricing of European basket call option with n-assets and a bond is discussed in this paper, where all prices of n-assets and the bond are driven by Exponential Ornstein-Uhlenbeck processes. The close-form of European basket option pricing formula is derived. Utilizing with 1-order differential approximate numerical solution of stochastic differential equation (Milstein method), a simulation example of European basket option pricing with 3 assets is also given.
Keywords
Cite
@article{arxiv.1410.6150,
title = {Pricing of European Basket Call Option under Exponential Ornstein-Uhlenbeck Process},
author = {Jingwei Liu and Jiwen Luo and Xing Chen},
journal= {arXiv preprint arXiv:1410.6150},
year = {2015}
}
Comments
This paper has been withdrawn by the author Jingwei Liu due to a crucial error in equation (11)