Pricing exotic options using the Wang transform

Coenraad C.A. Labuschagne and Theresa M. Offwood

The North American Journal of Economics and Finance, 2013, vol. 25, issue C, 139-150

Abstract: The Wang transform allows for a simple, yet intuitive approach to pricing options with underlying based on geometric Brownian motion. This paper shows how the approach by Hamada and Sherris can be used to price some exotic options. Examples showing the convergence of the Wang price to the Black–Scholes price for a Margrabe option, a geometric basket option and an asset-or-nothing option are given. We also take a look at the range of prices achievable using the Wang transform for these options.

Keywords: Wang transform; Exotic options; Geometric Brownian motion; Choquet pricing (search for similar items in EconPapers)
JEL-codes: C20 C63 C65 G24 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:25:y:2013:i:c:p:139-150

DOI: 10.1016/j.najef.2012.06.008

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