Cliquet Options: Pricing and Greeks in Deterministic and Stochastic Volatility Models

25 Pages Posted: 18 Sep 2007

Date Written: July 5, 2005

Abstract

This paper presents a method to determine the price of a cliquet option, as well as its sensitivity to changes in the market, the Greeks, for deterministic (also incorporating skews) and stochastic (Hestonian) volatility and, lognormal and jump-diffusion asset price - processes, with almost machine precision in a fraction of a second. In the pricing algorithms we make use of a new Laplace transform inversion technique, which guarantees fast and numerically stable pricing. The computation of the Greeks is based on a Girsanov type drift adjustment.

Keywords: cliquet option, Hestonian, Girsanov, Greeks

JEL Classification: G13,C63

Suggested Citation

Iseger, Peter den and Oldenkamp, Emöke, Cliquet Options: Pricing and Greeks in Deterministic and Stochastic Volatility Models (July 5, 2005). Available at SSRN: https://ssrn.com/abstract=1013510 or http://dx.doi.org/10.2139/ssrn.1013510

Peter den Iseger (Contact Author)

Cardano Risk Management ( email )

Rotterdam 3011 AA
Netherlands
+31 10 2434747 (Phone)

HOME PAGE: http://www.cardano.com

Emöke Oldenkamp

Cardano ( email )

Rotterdam 3011 AA
Netherlands

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