Pricing and hedging Margrabe options with stochastic volatilities
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- dc.contributor.author Alòs, Elisaca
- dc.contributor.author Rheinländer, Thorstenca
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2018-02-14T15:29:53Z
- dc.date.available 2018-02-14T15:29:53Z
- dc.date.issued 2015-03-01
- dc.date.modified 2018-02-14T15:28:25Z
- dc.description.abstract A Margrabe or exchange option is an option to exchange one asset for another. In a general stochastic volatility framework, by taking the second asset as a numeraire,we derive pricing as well as approximate pricing formulae for Margrabe options. The correlated Stein & Stein and the 3=2 model are studied as particular examples. Moreover, we derive the general mean-variance optimal hedging strategy and show that it is a delta-hedge only in case of zero correlation between asset prices and volatility.
- dc.format.mimetype application/pdfca
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1475
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/23366
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1475
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword stochastic volatility; margrabe options; change of numeraire; mean-variance hedging; malliavin calculus
- dc.subject.keyword Statistics, Econometrics and Quantitative Methods
- dc.title Pricing and hedging Margrabe options with stochastic volatilitiesca
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper