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Distribution of occupation times for constant elasticity of variance diffusion and the pricing of α-quantile options

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  • Kwai Sun Leung
  • Yue Kuen Kwok

Abstract

The main results of this paper are the derivation of the distribution functions of occupation times under the constant elasticity of variance process. The distribution functions can then be used to price α-quantile options. We also derive the fixed-floating symmetry relation for α-quantile options when the underlying asset price process follows a geometric Brownian motion.

Suggested Citation

  • Kwai Sun Leung & Yue Kuen Kwok, 2007. "Distribution of occupation times for constant elasticity of variance diffusion and the pricing of α-quantile options," Quantitative Finance, Taylor & Francis Journals, vol. 7(1), pages 87-94.
    • Handle: RePEc:taf:quantf:v:7:y:2007:i:1:p:87-94
    DOI: 10.1080/14697680600895021
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    References listed on IDEAS

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    1. Dmitry Davydov & Vadim Linetsky, 2001. "Pricing and Hedging Path-Dependent Options Under the CEV Process," Management Science, INFORMS, vol. 47(7), pages 949-965, July.
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    Cited by:

    1. Feng, Liming & Jiang, Pingping & Wang, Yongjin, 2020. "Constant elasticity of variance models with target zones," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 537(C).
    2. Djilali Ait Aoudia & Jean-Franc{c}ois Renaud, 2016. "Pricing occupation-time options in a mixed-exponential jump-diffusion model," Papers 1603.09329, arXiv.org.
    3. Hoi Ying Wong & Chun Man Chan, 2008. "Turbo warrants under stochastic volatility," Quantitative Finance, Taylor & Francis Journals, vol. 8(7), pages 739-751.
    4. Giuseppe Campolieti & Roman N. Makarov & Karl Wouterloot, 2013. "Pricing Step Options under the CEV and other Solvable Diffusion Models," Papers 1302.3771, arXiv.org.

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