Abstract
In this study, we propose a new formula for spread option pricing with the dependence of two assets described by a copula function. The proposed method’s advantage lies in its requirement of solely computing one-dimensional integrals. Any univariate stock price process, admitting an affine characteristic function, can be used in our formula to get an efficient numerical pricing procedure for a spread option. In the numerical analysis we present a comparison with the Monte Carlo simulation method to assess the performance of our approach, assuming that the univariate stock price follows three widely applied models: variance gamma, Heston’s stochastic volatility and affine Heston–Nandi GARCH(1,1) models.
| Lingua originale | Inglese |
|---|---|
| pagine (da-a) | 307-329 |
| Numero di pagine | 23 |
| Rivista | Annals of Operations Research |
| Volume | 336 |
| Numero di pubblicazione | 1-2 |
| DOI | |
| Stato di pubblicazione | Pubblicato - 2024 |
All Science Journal Classification (ASJC) codes
- Scienze delle Decisioni Generali
- Scienze della Gestione e Ricerca Operativa
Keywords
- Affine process
- Copula function
- Spread options
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