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Power option pricing problem of uncertain exponential Ornstein–Uhlenbeck model

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  • Liu, Yang
  • Lio, Waichon

Abstract

A power option is an exotic option whose nonlinear payoff is derived from the exponentiation of the price of the underlying asset. Due to its high-leverage, the power option is widely traded in the contemporary financial derivatives markets. This study examines the formulas for power call and put options based on the uncertain exponential Ornstein–Uhlenbeck model. Then the algorithms to calculate the power call and put option are designed. Furthermore, an analysis of the price sensitivity of power options is conducted.

Suggested Citation

  • Liu, Yang & Lio, Waichon, 2024. "Power option pricing problem of uncertain exponential Ornstein–Uhlenbeck model," Chaos, Solitons & Fractals, Elsevier, vol. 178(C).
    • Handle: RePEc:eee:chsofr:v:178:y:2024:i:c:s0960077923011955
    DOI: 10.1016/j.chaos.2023.114293
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    References listed on IDEAS

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