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Pricing options on the maximum or minimum of multi-assets under jump-diffusion processes

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  • Wang, Xingchun

Abstract

In this paper, we investigate the pricing issue of options on the maximum or the minimum of multi-assets by incorporating correlated jump risk. For each asset, a typical class of jump-diffusion processes are used to describe the values. In addition, the correlation between assets is allowed in the continuous component as well as the marked point process component. In the proposed framework, explicit pricing formulae of options on the maximum or the minimum of several assets are obtained. Finally, numerical examples are given to illustrate the effects of the maximum and jump risk.

Suggested Citation

  • Wang, Xingchun, 2020. "Pricing options on the maximum or minimum of multi-assets under jump-diffusion processes," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 16-26.
    • Handle: RePEc:eee:reveco:v:70:y:2020:i:c:p:16-26
    DOI: 10.1016/j.iref.2020.05.014
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    References listed on IDEAS

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    Cited by:

    1. Lu, Jin-Ray & Yang, Ya-Huei, 2021. "Option valuations and asset demands and supplies," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 49-64.
    2. Dai, Xingyu & Li, Matthew C. & Xiao, Ling & Wang, Qunwei, 2022. "COVID-19 and China commodity price jump behavior: An information spillover and wavelet coherency analysis," Resources Policy, Elsevier, vol. 79(C).
    3. Xue Jin & Shiwei Zhou & Kedong Yin & Mingzhen Li, 2021. "Relationships between Copper Futures Markets from the Perspective of Jump Diffusion," Mathematics, MDPI, vol. 9(18), pages 1-25, September.
    4. Song, Yuping & Huang, Jiefei & Zhang, Qichao & Xu, Yang, 2024. "Heterogeneity effect of positive and negative jumps on the realized volatility: Evidence from China," Economic Modelling, Elsevier, vol. 136(C).

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    More about this item

    Keywords

    Options on the maximum; Rainbow options; Jump-diffusion processes;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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