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Exchange option pricing under stochastic volatility: a correlation expansion

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  • F. Antonelli
  • A. Ramponi
  • S. Scarlatti

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  • F. Antonelli & A. Ramponi & S. Scarlatti, 2010. "Exchange option pricing under stochastic volatility: a correlation expansion," Review of Derivatives Research, Springer, vol. 13(1), pages 45-73, April.
    • Handle: RePEc:kap:revdev:v:13:y:2010:i:1:p:45-73
    DOI: 10.1007/s11147-009-9043-4
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    References listed on IDEAS

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    1. Bakshi, Gurdip & Cao, Charles & Chen, Zhiwu, 1997. "Empirical Performance of Alternative Option Pricing Models," Journal of Finance, American Finance Association, vol. 52(5), pages 2003-2049, December.
    2. Stein, Elias M & Stein, Jeremy C, 1991. "Stock Price Distributions with Stochastic Volatility: An Analytic Approach," The Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 727-752.
    3. Roger Lord & Remmert Koekkoek & Dick Van Dijk, 2010. "A comparison of biased simulation schemes for stochastic volatility models," Quantitative Finance, Taylor & Francis Journals, vol. 10(2), pages 177-194.
    4. Elisa Alòs, 2006. "A generalization of the Hull and White formula with applications to option pricing approximation," Finance and Stochastics, Springer, vol. 10(3), pages 353-365, September.
    5. Y. Maghsoodi, 2007. "Exact Solution Of A Martingale Stochastic Volatility Option Problem And Its Empirical Evaluation," Mathematical Finance, Wiley Blackwell, vol. 17(2), pages 249-265, April.
    6. Chung, San-Lin & Wang, Yaw-Huei, 2008. "Bounds and prices of currency cross-rate options," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 631-642, May.
    7. Fischer, Stanley, 1978. "Call Option Pricing when the Exercise Price Is Uncertain, and the Valuation of Index Bonds," Journal of Finance, American Finance Association, vol. 33(1), pages 169-176, March.
    8. Mark Broadie & Özgür Kaya, 2006. "Exact Simulation of Stochastic Volatility and Other Affine Jump Diffusion Processes," Operations Research, INFORMS, vol. 54(2), pages 217-231, April.
    9. Darrell Duffie & Jun Pan & Kenneth Singleton, 2000. "Transform Analysis and Asset Pricing for Affine Jump-Diffusions," Econometrica, Econometric Society, vol. 68(6), pages 1343-1376, November.
    10. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    11. Fabio Antonelli & Sergio Scarlatti, 2009. "Pricing options under stochastic volatility: a power series approach," Finance and Stochastics, Springer, vol. 13(2), pages 269-303, April.
    12. Margrabe, William, 1978. "The Value of an Option to Exchange One Asset for Another," Journal of Finance, American Finance Association, vol. 33(1), pages 177-186, March.
    13. Hull, John C & White, Alan D, 1987. "The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
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    Cited by:

    1. Elisa Al`os & Michael Coulon, 2018. "On the optimal choice of strike conventions in exchange option pricing," Papers 1807.05396, arXiv.org.
    2. Elisa Alòs & Thorsten Rheinländer, 2015. "Pricing and hedging Margrabe options with stochastic volatilities," Economics Working Papers 1475, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2017.
    3. Len Patrick Dominic M. Garces & Gerald H. L. Cheang, 2021. "A numerical approach to pricing exchange options under stochastic volatility and jump-diffusion dynamics," Quantitative Finance, Taylor & Francis Journals, vol. 21(12), pages 2025-2054, December.
    4. Lucia Caramellino & Giorgio Ferrari & Roberta Piersimoni, 2011. "Power Series Representations for European Option Prices under Stochastic Volatility Models," Papers 1105.0068, arXiv.org, revised Jun 2011.
    5. Geonwoo Kim, 2020. "Valuation of Exchange Option with Credit Risk in a Hybrid Model," Mathematics, MDPI, vol. 8(11), pages 1-11, November.
    6. Kaustav Das & Nicolas Langren'e, 2020. "Explicit approximations of option prices via Malliavin calculus in a general stochastic volatility framework," Papers 2006.01542, arXiv.org, revised Jan 2024.
    7. Gabueva, L.A., 2015. "Developing a Set of Organizational and Economic Measures of Construction Personnel Policy in the Health Ministry of Russian Federation in a Phased Transition of Industry Workers to 'Effective Contract," Published Papers 2307, Russian Presidential Academy of National Economy and Public Administration.
    8. Len Patrick Dominic M. Garces & Gerald H. L. Cheang, 2021. "A Numerical Approach to Pricing Exchange Options under Stochastic Volatility and Jump-Diffusion Dynamics," Papers 2106.07362, arXiv.org.
    9. Xin‐Jiang He & Sha Lin, 2023. "Analytically pricing exchange options with stochastic liquidity and regime switching," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(5), pages 662-676, May.
    10. Pasricha, Puneet & He, Xin-Jiang, 2022. "Skew-Brownian motion and pricing European exchange options," International Review of Financial Analysis, Elsevier, vol. 82(C).
    11. Yijuan Liang & Xiuchuan Xu, 2019. "Variance and Dimension Reduction Monte Carlo Method for Pricing European Multi-Asset Options with Stochastic Volatilities," Sustainability, MDPI, vol. 11(3), pages 1-21, February.
    12. Elisa Alòs & Michael Coulon, 2024. "On the Optimal Choice of Strike Conventions in Exchange Option Pricing," Mathematics, MDPI, vol. 12(19), pages 1-19, September.
    13. Kim, Donghyun & Kim, Geonwoo & Yoon, Ji-Hun, 2022. "Pricing of vulnerable exchange options with early counterparty credit risk," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    14. Len Patrick Dominic M. Garces & Gerald H. L. Cheang, 2020. "A Put-Call Transformation of the Exchange Option Problem under Stochastic Volatility and Jump Diffusion Dynamics," Papers 2002.10194, arXiv.org.
    15. F. Antonelli & A. Ramponi & S. Scarlatti, 2021. "CVA and vulnerable options pricing by correlation expansions," Annals of Operations Research, Springer, vol. 299(1), pages 401-427, April.
    16. Colin Turfus & Alexander Shubert, 2017. "ANALYTIC PRICING OF CoCo BONDS," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 20(05), pages 1-26, August.
    17. Kaustav Das & Nicolas Langren'e, 2018. "Closed-form approximations with respect to the mixing solution for option pricing under stochastic volatility," Papers 1812.07803, arXiv.org, revised Oct 2021.
    18. Alessandro Ramponi, 2022. "Spread Option Pricing in Regime-Switching Jump Diffusion Models," Mathematics, MDPI, vol. 10(9), pages 1-15, May.
    19. Kim, Jeong-Hoon & Park, Chang-Rae, 2017. "A multiscale extension of the Margrabe formula under stochastic volatility," Chaos, Solitons & Fractals, Elsevier, vol. 97(C), pages 59-65.
    20. Gerald H. L. Cheang & Len Patrick Dominic M. Garces, 2020. "Representation of Exchange Option Prices under Stochastic Volatility Jump-Diffusion Dynamics," Papers 2002.10202, arXiv.org.
    21. Kim, Geonwoo & Koo, Eunho, 2016. "Closed-form pricing formula for exchange option with credit risk," Chaos, Solitons & Fractals, Elsevier, vol. 91(C), pages 221-227.

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