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A Numerical Method for First-Touch Digital Options under Jump-Diffusion Model

Digital options, the basic building blocks for valuing complex financial assets, they play an important role in options valuation and hedging. We survey the digital options pricing formula under diffusion processes and jump-diffusion processes.
Since the existent first-touch digital options pricing formulas with jump-diffusion processes are all in their Laplace transform of the option value. To inverse the Laplace transforms is critical when doing options valuation. Therefore, we adopt a phase-type jump-diffusion model which is developed by Chen, Lee and Sheu [2007] as our main model, and use FFT inversion to get the first-touch digital option price under
(2,2)-factor exponential jump-diffusion processes.

Identiferoai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0804108-135831
Date04 August 2008
CreatorsHuang, Heng-Ching
ContributorsMing-Chi Chen, Jen-Jsung Huang, Chou-Wen Wang
PublisherNSYSU
Source SetsNSYSU Electronic Thesis and Dissertation Archive
LanguageEnglish
Detected LanguageEnglish
Typetext
Formatapplication/pdf
Sourcehttp://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0804108-135831
Rightsrestricted, Copyright information available at source archive

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