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arXiv · 1910.07971

The value of power-related options under spectrally negative Lévy processes

Jean-Philippe Aguilar
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Abstract

We provide analytical tools for pricing power options with exotic features (capped or log payoffs, gap options ...) in the framework of exponential Lévy models driven by one-sided stable or tempered stable processes. Pricing formulas take the form of fast converging series of powers of the log-forward moneyness and of the time-to-maturity; these series are obtained via a factorized integral representation in the Mellin space evaluated by means of residues in $\mathbb{C}$ or $\mathbb{C}^2$. Comparisons with numerical methods and efficiency tests are also discussed.

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Jean-Philippe Aguilar. 2021-01-19. The value of power-related options under spectrally negative Lévy processes. https://doi.org/10.1007/s11147-020-09174-0

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