Analyticity of the Wiener–Hopf Factors and Valuation of Exotic Options in Lévy Models

Ernst Eberlein (), Kathrin Glau () and Antonis Papapantoleon ()
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Ernst Eberlein: University of Freiburg, Department of Mathematical Stochastics
Kathrin Glau: University of Freiburg, Department of Mathematical Stochastics
Antonis Papapantoleon: TU Berlin, Institute of Mathematics

Chapter Chapter 8 in Advanced Mathematical Methods for Finance, 2011, pp 223-245 from Springer

Abstract: Abstract This paper considers the valuation of exotic path-dependent options in Lévy models, in particular options on the supremum and the infimum of the asset price process. Using the Wiener–Hopf factorization, we derive expressions for the analytically extended characteristic function of the supremum and the infimum of a Lévy process. Combined with general results on Fourier methods for option pricing, we provide formulas for the valuation of one-touch options, lookback options, and equity default swaps in Lévy models.

Keywords: Lévy processes; Wiener–Hopf factorization; Exotic options; 91Gxx; 60G51 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-18412-3_8

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DOI: 10.1007/978-3-642-18412-3_8

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