Pricing and Hedging of Cliquet Options and Locally Capped Contracts

Carole Bernard; Wenbo V. Li

doi:10.1137/100818157

Pricing and Hedging of Cliquet Options and Locally Capped Contracts

SIAM Journal on Financial Mathematics ◽

10.1137/100818157 ◽

2013 ◽

Vol 4 (1) ◽

pp. 353-371 ◽

Cited By ~ 13

Author(s):

Carole Bernard ◽

Wenbo V. Li

Keyword(s):

Cliquet Options

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Fast Pricing of Cliquet Options with Global Floor

The Journal of Derivatives ◽

10.3905/jod.2006.667550 ◽

2006 ◽

Vol 14 (2) ◽

pp. 47-60 ◽

Cited By ~ 1

Author(s):

Mats Kjaer

Keyword(s):

Cliquet Options

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THE PRICING OF EXOTIC OPTIONS BY MONTE–CARLO SIMULATIONS IN A LÉVY MARKET WITH STOCHASTIC VOLATILITY

International Journal of Theoretical and Applied Finance ◽

10.1142/s0219024903002249 ◽

2003 ◽

Vol 06 (08) ◽

pp. 839-864 ◽

Cited By ~ 16

Author(s):

WIM SCHOUTENS ◽

STIJN SYMENS

Keyword(s):

Monte Carlo Simulation ◽

Monte Carlo ◽

Stochastic Volatility ◽

Stock Price ◽

Poisson Approximation ◽

Exotic Options ◽

Option Prices ◽

Compound Poisson Approximation ◽

Black Scholes ◽

Cliquet Options

Recently, stock price models based on Lévy processes with stochastic volatility were introduced. The resulting vanilla option prices can be calibrated almost perfectly to empirical prices. Under this model, we will price exotic options, like barrier, lookback and cliquet options, by Monte–Carlo simulation. The sampling of paths is based on a compound Poisson approximation of the Lévy process involved. The precise choice of the terms in the approximation is crucial and investigated in detail. In order to reduce the standard error of the Monte–Carlo simulation, we make use of the technique of control variates. It turns out that there are significant differences with the classical Black–Scholes prices.

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