Robustness analysis on the pricing of some options on two assets with delays

Lisha Lin, Yaqiong Li, Jianhong Wu and Ge Li

Physica A: Statistical Mechanics and its Applications, 2019, vol. 532, issue C

Abstract: We examine the impact of delays on option pricing and obtain sufficient conditions for the robustness of delays for certain two-asset options, where the underlying assets involved are modeled by stochastic delay differential equations. We prove the robustness of delay parameters on prices of underlying asset and prices of three types of options, which differ in their payoff functions. We provide numerical experiments which validate our theoretical results and find that when the underlying assets exist delayed response, the corresponding impact on option prices is robust with respect to the small changes in delay parameters.

Keywords: Delay; Robustness; Two-asset options; Euler–Maruyama approximation (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:532:y:2019:i:c:s0378437119311100

DOI: 10.1016/j.physa.2019.121883

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