Abstract
Abstract
In this paper, we study the pricing of vulnerable Asian options with liquidity risk. We employ general Lévy processes to capture the changes in the liquidity discount factors and the information processes of all assets. In the proposed pricing model, we obtain the closed-form pricing formula of vulnerable Asian options using the Fourier transform methods. Finally, the derived pricing formula is used to illustrate the effects of asymmetric jump risk, and the effects are relatively stable on (vulnerable) Asian options with different moneynesses.
Funder
National Natural Science Foundation of China
Publisher
Cambridge University Press (CUP)
Subject
Industrial and Manufacturing Engineering,Management Science and Operations Research,Statistics, Probability and Uncertainty,Statistics and Probability