Pricing of some exotic options with NIG-Levy input
Rasmus, Sebastian; Asmussen, S; Wiktorsson, Magnus (2004). Pricing of some exotic options with NIG-Levy input Computational Science - ICCS 2004. Proceedings Part IV. (Lecture Notes in Computer Science), 3039,, 795 - 802. 4th International Conference. Kraków, Poland: Springer
Conference Proceeding/Paper
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Published
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English
Authors:
Rasmus, Sebastian
;
Asmussen, S
;
Wiktorsson, Magnus
Department:
Mathematical Statistics
Mathematical Finance-lup-obsolete
Financial Mathematics Group
Research Group:
Mathematical Finance-lup-obsolete
Financial Mathematics Group
Abstract:
We study the problem of pricing barrier options and Russian options driven by exponential NIG Levy processes by simulation. Simulating at a discrete grid creates a systematic bias because the minimum and maximum in between grid points is neglected. The proposed solution is to simulate the large jumps only and use a Brownian approximation for the rest combined with explicit formulas for Brownian minima and maxima.
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