Pricing Fade-in Options Under GARCH-Jump Processes

Xingchun Wang () and Han Zhang ()
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Han Zhang: Renmin University of China

Computational Economics, 2024, vol. 64, issue 4, No 21, 2563-2584

Abstract: Abstract In this paper, we investigate fade-in options under GARCH-jump processes. Specifically, we adopt NIG distributions to capture jump risk, and both market and individual jumps are considered. In the pricing model driven by GARCH-jump processes, we obtain the prices of fade-in options using the Fourier transform methods. Finally, we use the derived pricing formulae to illustrate the effects of fade-in sets and the parameters in the jump processes.

Keywords: GARCH-jump processes; Fade-in options; Fourier transform; Default risk (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10614-023-10527-8

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