We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
An efficient unified approach for spread option pricing in a copula market model.
- Authors
Berton, Edoardo; Mercuri, Lorenzo
- 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.
- Subjects
MONTE Carlo method; OPTIONS (Finance); MARKET pricing; MARKET prices; COPULA functions; CHARACTERISTIC functions; PRICE variance
- Publication
Annals of Operations Research, 2024, Vol 336, Issue 1/2, p307
- ISSN
0254-5330
- Publication type
Article
- DOI
10.1007/s10479-023-05549-2