Abstract
We provide new closed-form approximations for the pricing of spread options in three specific instances of exponential Levy markets, i.e., when log-returns are modeled as Brownian motions (Black-Scholes model), Variance Gamma processes (VG model) or Normal Inverse Gaussian processes (NIG model). For the specific case of exchange options (spread options with zero strike), we generalize the well-known Margrabe formula (1978) that is valid in a Black-Scholes model to the VG model under a homogeneity assumption.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
