IDEAS home Printed from https://ideas.repec.org/a/taf/uaajxx/v13y2009i2p202-216.html
   My bibliography  Save this article

Valuation of Discrete Dynamic Fund Protection Under Lévy Processes

Author

Listed:
  • Hoi Wong
  • Ka Lam

Abstract

This paper investigates the valuation of discrete dynamic fund protection (DFP) under Levy processes. Specifically, the analytical solution of discrete DFP under Lévy processes is obtained in terms of Fourier transforms. The derivation uses Spitzer’s formula and leads to a recursion on computing the characteristic function of the maximum protection-to-fund ratio using the Fourier inversion. DFP can then be valued efficiently and accurately via the fast Fourier transform. The pricing behavior of the discrete DFP is numerically examined using several Levy processes, such as geometric Brownian motion, jump-diffusion models, and variance gamma process. Numerical experiments confirm that the proposed approach produces highly accurate discrete DFP values within 1 second.

Suggested Citation

  • Hoi Wong & Ka Lam, 2009. "Valuation of Discrete Dynamic Fund Protection Under Lévy Processes," North American Actuarial Journal, Taylor & Francis Journals, vol. 13(2), pages 202-216.
    • Handle: RePEc:taf:uaajxx:v:13:y:2009:i:2:p:202-216
    DOI: 10.1080/10920277.2009.10597548
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10920277.2009.10597548
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10920277.2009.10597548?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wong, Hoi Ying & Guan, Peiqiu, 2011. "An FFT-network for Lévy option pricing," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 988-999, April.
    2. Linyi Qian & Zhuo Jin & Wei Wang & Lyu Chen, 2018. "Pricing dynamic fund protections for a hyperexponential jump diffusion process," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 47(1), pages 210-221, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:uaajxx:v:13:y:2009:i:2:p:202-216. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/uaaj .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.