Abstract
In this article Marena, Roncoroni, and
Fusai derive a closed-form formula for
the fair value of call and put options
written on the arithmetic average of
security prices driven by jump diffusion
processes displaying (possibly periodical)
trend, time varying volatility,
and mean reversion. The model allows
one for jointly fitting quoted futures
curve and the time structure of
spot price volatility. These result extends
the no-jump case put forward in
[Fusai, G., Marena, M., Roncoroni, A.
2008. Analytical Pricing of Discretely
Monitored Asian-Style Options: Theory
and Application to Commodity Markets.
Journal of Banking and Finance
32 (10), 2033-2045]. A few tests based
on commodity price data assess the importance
of introducing a jump component
on the resulting option prices.
| Original language | English |
|---|---|
| Pages (from-to) | 47-55 |
| Number of pages | 9 |
| Journal | Argo Magazine |
| Volume | 1 |
| Issue number | 1 |
| Publication status | Published - 2013 |
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