PRICING DERIVATIVES ON TWO-DIMENSIONAL LÉVY PROCESSES

PRICING DERIVATIVES ON TWO-DIMENSIONAL LÉVY PROCESSES

The aim of this work is to use a duality approach to study the pricing of derivatives depending on two stocks driven by a bidimensional Lévy process. The main idea is to apply Girsanov's Theorem for Lévy processes, in order to reduce the posed problem to a problem with one Lévy driven stock in...

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Veröffentlicht in:International Journal of Theoretical and Applied Finance (IJTAF) 2006-03, Vol.9 (2), p.185-197
Hauptverfasser: FAJARDO, JOSÉ, MORDECKI, ERNESTO
Format: Artikel
Sprache:eng
Schlagworte:
Applied economics
Asset valuation
derivative pricing
Derivatives
dual market method
Finance
Lévy processes
Mathematical methods
optimal stopping
Pricing
Stochastic processes
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Beschreibung
Zusammenfassung:The aim of this work is to use a duality approach to study the pricing of derivatives depending on two stocks driven by a bidimensional Lévy process. The main idea is to apply Girsanov's Theorem for Lévy processes, in order to reduce the posed problem to a problem with one Lévy driven stock in an auxiliary market, baptized as "dual market". In this way, we extend the results obtained by Gerber and Shiu [5] for two-dimensional Brownian motion.
ISSN:0219-0249
1793-6322
1793-6322
DOI:10.1142/S0219024906003536