Analyticity of the Wiener-Hopf factors and valuation of exotic options in L\'evy models

Ernst Eberlein, Kathrin Glau and Antonis Papapantoleon

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Abstract: This paper considers the valuation of exotic path-dependent options in L\'evy 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 L\'evy 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 L\'evy models.

Date: 2009-11, Revised 2010-10
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Published in Advanced Mathematical Methods for Finance, pp. 223-245, Springer, 2011

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0911.0373

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