Representation of Exchange Option Prices under Stochastic Volatility Jump-Diffusion Dynamics

24 Feb 2020 Cheang Gerald H. L. Garces Len Patrick Dominic M.

In this article, we provide representations of European and American exchange option prices under stochastic volatility jump-diffusion (SVJD) dynamics following models by Merton (1976), Heston (1993), and Bates (1996). A Radon-Nikodym derivative process is also introduced to facilitate the shift from the objective market measure to other equivalent probability measures, including the equivalent martingale measure... (read more)

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