ENGLISH

Pricing of Derivatives on Mean-Reverting Assets

By Björn Lutz (auth.)

Book information

Publisher
Springer-Verlag Berlin Heidelberg
Year
2010
ISBN
978-3-642-02908-0, 978-3-642-02909-7
DOI
10.1007/978-3-642-02909-7
Language
english
Format
PDF
Filesize
2 MB (2274893 bytes)
Series
Lecture Notes in Economics and Mathematical Systems 630
Edition
1
Pages
137\145
Orientation
yes
Scanned
yes
Time added
2013-08-01 04:00:00
Finance /Banking; Financial Economics; Quantitativ

Description

The topic of this book is the development of pricing formulae for European style derivatives on assets with mean-reverting behavior, especially commodity derivatives. For this class of assets, convenience yield effects lead to mean-reversion under the risk-neutral measure. Mean-reversion in the log-price process is combined with other stochastic factors such as stochastic volatility, jumps in the underlying and the price process and a stochastic target level as well as with deterministic seasonality effects. Another focus is on numerical algorithms to calculate the Fourier integral as well as to integrate systems of ordinary differential equations.

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