PRICING POWERED \(\alpha\)-POWER QUANTO OPTIONS WITH AND WITHOUT POISSON JUMPS

Javed Hussain     (Department of Mathematics, Sukkur IBA University, Nisar Ahmed Siddiqui Road, Sukkur Sindh, Pakistan)
Nisar Ali     (Department of Mathematics, Sukkur IBA University, Nisar Ahmed Siddiqui Road, Sukkur Sindh, Pakistan)

Abstract


This paper deals with the problem of Black-Scholes pricing for the Quanto option pricing with power type powered and powered payoff underlying foreign currency is driven by Brownian motion and Poisson jumps, via risk-neutral probability measure. Our approach in this work is probabilistic, based on Feynman–Kac formula.


Keywords


Financial derivatives, Quanto option, Power payoff, Risk-neutral dynamics

Full Text:

PDF

References


  1. Black F., Scholes M. The pricing of options and corporate liabilities. J. Political Economy, 1973. Vol. 81, o. 3. P. 637–654. URL: http://www.jstor.org/stable/1831029
  2. Capiński M., Kopp E., Traple J. Stochastic Calculus for Finance. Cambridge, UK: Cambridge University Press, 2012. 186 p.
  3. Derman E., Kani I. Stochastic implied trees: arbitrage pricing with stochastic term and strike structure of volatility. Int. J. Theor. Appl. Finance, 1998. Vol. 1, No. 1. P. 61–110. DOI: 10.1142/s0219024998000059
  4. Dupire B. Pricing with a smile. Risk, 1994. Vol. 7. P. 18–20.
  5. Lee Y., Yoo H.-S., Lee J. Pricing formula for power Quanto options with each type of payoffs at maturity. Global J. Pure Appl. Math., 2017. Vol. 13, No. 9. P. 6695–6702.
  6. Teng L., Ehrhardt M., Günther M. The pricing of Quanto options under dynamic correlation. J. Comput. Appl. Math., 2015. Vol. 275. P. 304–310. DOI: 10.1016/j.cam.2014.07.017




DOI: http://dx.doi.org/10.15826/umj.2024.1.005

Article Metrics

Metrics Loading ...

Refbacks

  • There are currently no refbacks.