Abstract

http://ssrn.com/abstract=2232131
 
 

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Pricing of Barrier Option Under Levy Process: A Mellin Transform Approach


Sudip Ratan Chandra


Indian Statistical Institute, Kolkata

Diganta Mukherjee


Indian Statistical Institute, Kolkata

Indranil SenGupta


North Dakota State University

January 24, 2014


Abstract:     
We propose a Mellin transform method to numerically compute the prices and greeks of single barrier options driven by a class of Levy processes under incomplete market with Follmer Schweizer minimal measure. We develop a partial integro-differential equation (PIDE) for Barrier option and applied Mellin transform on it. Subsequently we perform the Inversion of these Mellin transform to construct an approximation of the prices and sensitivities of barrier options in a class of Levy models. The class includes many of the Levy models employed in quantitative finance such as the NIG, CGMY and Meixner models.

Number of Pages in PDF File: 22

Keywords: Barrier Option pricing, Levy Process, Incomplete Market, Numerical Inverse Mellin Transform, Simulation

JEL Classification: G13

working papers series


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Date posted: March 12, 2013 ; Last revised: March 10, 2014

Suggested Citation

Chandra, Sudip Ratan and Mukherjee, Diganta and SenGupta, Indranil, Pricing of Barrier Option Under Levy Process: A Mellin Transform Approach (January 24, 2014). Available at SSRN: http://ssrn.com/abstract=2232131 or http://dx.doi.org/10.2139/ssrn.2232131

Contact Information

Sudip Ratan Chandra (Contact Author)
Indian Statistical Institute, Kolkata ( email )
203 B.T. Road
Kolkata, West Bengal 700108
India
Diganta Mukherjee
Indian Statistical Institute, Kolkata ( email )
203 B.T. Road
Kolkata, West Bengal 700108
India
Indranil SenGupta
North Dakota State University ( email )
Fargo, ND 58105
United States
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