Cliquet option pricing with Meixner processes

Abstract

We investigate the pricing of cliquet options in a geometric Meixner model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a pure-jump Meixner--Lévy process yielding Meixner distributed log-returns. In this setting, we infer semi-analytic expressions for the cliquet option price by using the probability distribution function of the driving Meixner--Lévy process and by an application of Fourier transform techniques. In an introductory section, we compile various facts on the Meixner distribution and the related class of Meixner--Lévy processes. We also propose a customized measure change preserving the Meixner distribution of any Meixner process.

Published at https://doi.org/10.15559/18-VMSTA96 in the Modern Stochastics: Theory and Applications (https://www.i-journals.org/vtxpp/VMSTA) by VTeX (http://www.vtex.lt/)