Analytic techniques for option pricing under a hyperexponential L\'{e}vy model
Mathematical Finance
2017-05-18 v1 Pricing of Securities
Abstract
We develop series expansions in powers of and of solutions of the equation , where is the Laplace exponent of a hyperexponential L\'{e}vy process. As a direct consequence we derive analytic expressions for the prices of European call and put options and their Greeks (Theta, Delta, and Gamma) and a full asymptotic expansion of the short-time Black-Scholes at-the-money implied volatility. Further we demonstrate how the speed of numerical algorithms for pricing exotic options, which are based on the Laplace transform, may be increased.
Cite
@article{arxiv.1705.05934,
title = {Analytic techniques for option pricing under a hyperexponential L\'{e}vy model},
author = {Daniel Hackmann},
journal= {arXiv preprint arXiv:1705.05934},
year = {2017}
}
Comments
32 pages, 7 Figures