National Changhua University of Education Institutional Repository : Item 987654321/1863

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NCUEIR > College of Management > Department of Business Administration > Periodical Articles > Item 987654321/1863

Please use this identifier to cite or link to this item: http://ir.ncue.edu.tw/ir/handle/987654321/1863

Title:	PRICING FOREIGN EQUITY OPTIONS UNDER LEVY PROCESSES
Authors:	SHIAN-CHANG HUANG;MAO-WEI HUNG
Contributors:	企業管理學系
Date:	2005
Issue Date:	2010-11-15T07:40:41Z
Abstract:	This article investigates the valuation of a foreign equity option whose value depends on the exchange rate and foreign equity prices. Assuming that these underlying price processes are correlated and driven by a multidimensional Lévy process, a method suitable for solving the complex valuation problem is developed. First, to reduce the number of dimensions of the problem, the probability measure is changed to embed some dimensions of the Lévy process into the pricing measure. Second, to simplify the integral complexity of the discounted terminal payoff, the valuation problem is transformed to Fourier space. The main contribution of this study is that by combining these two methods, the multivariate valuation problem is significantly simplified, and very accurate results are obtained relatively quickly. This powerful method can also be applied to other multivariate pricing problems involving Lévy processes.
Relation:	The Journal of Futures Markets, 25(10):917–944
Appears in Collections:	[Department of Business Administration] Periodical Articles

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