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Pricing Options in Jump Diffusion Models Using Mellin Transforms
Landesbank Baden-Wuerttemberg (LBBW), Stuttgart, Germany
- 1 Landesbank Baden-Wuerttemberg (LBBW), Stuttgart, Germany
Journal of Mathematical Finance·Volume 03 (2013)·Pages 366–373·Published 8 August 2013·DOI10.4236/jmf.2013.33037
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Abstract
This paper is concerned with the valuation of options in jump diffusion models. The partial integro-differential equation (PIDE) inherent in the pricing problem is solved by using the Mellin integral transform. The solution is a single integral expression independent of the distribution of the jump size. We also derive analytical expressions for the Greeks. The results are implemented and compared to other approaches.
KeywordsJump DiffusionMellin TransformEuropean Option
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