Pricing of Spread Options on a Bivariate Jump Market and Stability to Model Risk

Fred Espen Benth, Giulia Di Nunno, Asma Khedher and Maren Diane Schmeck

Applied Mathematical Finance, 2015, vol. 22, issue 1, 28-62

Abstract: We study the pricing of spread options and we obtain a Margrabe-type formula for a bivariate jump-diffusion model. Moreover, we study the robustness of the price to model risk, in the sense that we consider two types of bivariate jump-diffusion models: one allowing for infinite activity small jumps and one not. In the second model, an adequate continuous component describes the small variation of prices. We illustrate our computations by several examples.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1350486X.2014.948708 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apmtfi:v:22:y:2015:i:1:p:28-62

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAMF20

DOI: 10.1080/1350486X.2014.948708

Access Statistics for this article

Applied Mathematical Finance is currently edited by Professor Ben Hambly and Christoph Reisinger

More articles in Applied Mathematical Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().