Paper #1475
- Títol:
- Pricing and hedging Margrabe options with stochastic volatilities
- Autors:
- Elisa Alòs i Thorsten Rheinländer
- Data:
- Març 2015
- Resum:
- A Margrabe or exchange option is an option to exchange one asset for another. In a general stochastic volatility framework, by taking the second asset as a numeraire,we derive pricing as well as approximate pricing formulae for Margrabe options. The correlated Stein & Stein and the 3=2 model are studied as particular examples. Moreover, we derive the general mean-variance optimal hedging strategy and show that it is a delta-hedge only in case of zero correlation between asset prices and volatility.
- Paraules clau:
- Stochastic volatility; Margrabe options; change of numeraire; mean-variance hedging; Malliavin calculus
- Àrea de Recerca:
- Estadística, Econometria i Mètodes Quantitatius
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