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Perpetual Exchange Options under Jump-Diffusion Dynamics

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  • Gerald H. L. Cheang
  • Guanghua Lian

Abstract

This paper provides a pricing formula for perpetual exchange options, where the dynamics of the underlying assets are driven by jump-diffusion processes. It is an extension of Gerber and Shiu, and also Wong, who have priced perpetual exchange options under the pure-diffusion setting, and that of Gerber and Shiu, who have also considered perpetual options on single assets under jump-diffusion dynamics. It complements the results of Cheang and Chiarella, who derive a probabilistic representation of the American exchange option price under jump-diffusion dynamics.

Suggested Citation

  • Gerald H. L. Cheang & Guanghua Lian, 2015. "Perpetual Exchange Options under Jump-Diffusion Dynamics," Applied Mathematical Finance, Taylor & Francis Journals, vol. 22(5), pages 450-462, November.
    • Handle: RePEc:taf:apmtfi:v:22:y:2015:i:5:p:450-462
    DOI: 10.1080/1350486X.2015.1061443
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    Cited by:

    1. Guanghua Lian & Robert J. Elliott & Petko Kalev & Zhaojun Yang, 2022. "Approximate pricing of American exchange options with jumps," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(6), pages 983-1001, June.

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