American Exchange option driven by a L\'evy process
Zakaria Marah
TL;DR
This paper develops a method for pricing American Exchange options driven by Le9vy processes, decomposing the price into European option value plus an early exercise premium, and analyzing the free boundary properties.
Contribution
It introduces a novel approach to price American Exchange options with Le9vy processes, including a decomposition and an approximate formula for practical computation.
Findings
Representation of American Exchange option as European price plus premium
Analysis of free boundary properties in the Le9vy process context
Derivation of an approximate pricing formula
Abstract
We consider the problem of pricing American Exchange options driven by a L\'evy process. We study the properties of American Exchange options, we represented it as the sum of the price of the corresponding European exchange option price and an early exercise premium. Secondly, we show some properties of the free boundary and give an approximative formula of an American Exchange option.
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Taxonomy
TopicsStochastic processes and financial applications · Mathematical Dynamics and Fractals · Stochastic processes and statistical mechanics
Methods7 Fastest Ways to Call American Airlines Reservations Number (USA Guide)