Pricing options on the maximum or minimum of multi-assets under jump-diffusion processes

Xingchun Wang ()

International Review of Economics & Finance, 2020, vol. 70, issue C, 16-26

Abstract: In this paper, we investigate the pricing issue of options on the maximum or the minimum of multi-assets by incorporating correlated jump risk. For each asset, a typical class of jump-diffusion processes are used to describe the values. In addition, the correlation between assets is allowed in the continuous component as well as the marked point process component. In the proposed framework, explicit pricing formulae of options on the maximum or the minimum of several assets are obtained. Finally, numerical examples are given to illustrate the effects of the maximum and jump risk.

Keywords: Options on the maximum; Rainbow options; Jump-diffusion processes (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:70:y:2020:i:c:p:16-26

DOI: 10.1016/j.iref.2020.05.014

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