Corpus ID: 211259224

A Put-Call Transformation of the Exchange Option Problem under Stochastic Volatility and Jump Diffusion Dynamics

@article{Garces2020APT,
  title={A Put-Call Transformation of the Exchange Option Problem under Stochastic Volatility and Jump Diffusion Dynamics},
  author={Len Patrick Dominic M. Garces and G. Cheang},
  journal={arXiv: Mathematical Finance},
  year={2020}
}
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent martingale measure obtained by setting the second asset yield process as the numeraire asset, as suggested by Bjerskund and Stensland (1993). Such a choice for the numeraire reduces the exchange option pricing problem, a two-dimensional problem, to pricing a call… Expand
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