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arXiv · 1206.3220

Valuation and parities for exchange options

Constantinos Kardaras
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Abstract

Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via expectations of auxiliary probabilities using the change-of-numeraire technique. Extensive discussion is provided regarding the way that folklore results such as Merton's no-early-exercise theorem and traditional parity relations have to be altered in this more versatile framework.

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Constantinos Kardaras. 2014-11-29. Valuation and parities for exchange options. https://arxiv.org/abs/1206.3220

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