Path-Dependent Currency Options With Mean Reversion

Download or read book Path-Dependent Currency Options With Mean Reversion written by Hoi Ying Wong and published by . This book was released on 2009 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a path-dependent currency option pricing framework in which the exchange rate follows a mean-reverting lognormal process. Analytical solutions are derived for barrier options with a constant barrier, lookback options and turbo warrants. As the analytical solutions are obtained in Laplace transform, we show numerically that our solution implemented with a numerical Laplace inversion is efficient and accurate. The pricing behavior of path-dependent options with mean-reversion is contrasted to the Black-Scholes model.