Valuation and parities for exchange options
Pricing of Securities
2014-12-02 v2 Probability
Abstract
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via expectations of auxiliary probabilities using the change-of-numeraire technique. Extensive discussion is provided regarding the way that folklore results such as Merton's no-early-exercise theorem and traditional parity relations have to be altered in this more versatile framework.
Keywords
Cite
@article{arxiv.1206.3220,
title = {Valuation and parities for exchange options},
author = {Constantinos Kardaras},
journal= {arXiv preprint arXiv:1206.3220},
year = {2014}
}
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19 pages