A comparison of European and Asian options under Markov additive processes

Abstract

We provide results relating to the integrability, uniform integrability and local integrability of exponential MAPs, which are natural extensions of exponential Levy models. Then, we use Mellin transform and partial integro-differential equation methods to value European options under a such a model. Finally, a comparison is made between the price of a European call option and that of an Asian call option.

27 Pages

References in corpus (2)

• The Lamperti representation of real-valued self-similar Markov processes
• The hitting time of zero for a stable process