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Review of Derivatives Research

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01-10-2016

On exact pricing of FX options in multivariate time-changed Lévy models

Authors: Roman V. Ivanov, Katsunori Ano

Published in: Review of Derivatives Research | Issue 3/2016

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Abstract

In this paper we discuss foreign-exchange option pricing in conditionally Gaussian models, namely in the variance-gamma and in the normal-inverse Gaussian models. It happens that in the both models closed-form pricing is attainable. The used method developes the one of the work by Madan et al. (Eur Finance Rev 2:79–105, 1998) where the price of the European call is primarily derived. The obtained formulas are based on values of the Gauss and the Appell hypergeometric functions.

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Title: On exact pricing of FX options in multivariate time-changed Lévy models
Authors: Roman V. Ivanov
Katsunori Ano
Publication date: 01-10-2016
Publisher: Springer US
Published in: Review of Derivatives Research / Issue 3/2016
Print ISSN: 1380-6645
Electronic ISSN: 1573-7144
DOI: https://doi.org/10.1007/s11147-016-9120-4