Title
Path integral approach to the pricing of timer options with the Duru-Kleinert time transformation Path integral approach to the pricing of timer options with the Duru-Kleinert time transformation
Author
Faculty/Department
Faculty of Sciences. Physics
Publication type
article
Publication
Lancaster, Pa ,
Subject
Physics
Source (journal)
Physical review : E : statistical physics, plasmas, fluids, and related interdisciplinary topics. - Lancaster, Pa, 1993 - 2000
Volume/pages
83(2011) :5 , p. 056112,1-056112,12
ISSN
1063-651X
1095-3787
Article Reference
056112
Carrier
E-only publicatie
Target language
Dutch (dut)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
In this paper, a time substitution as used by Duru and Kleinert in their treatment of the hydrogen atom with path integrals is performed to price timer options under stochastic volatility models. We present general pricing formulas for both the perpetual timer call options and the finite time-horizon timer call options. These general results allow us to find closed-form pricing formulas for both the perpetual and the finite time-horizon timer options under the 3/2 stochastic volatility model as well as under the Heston stochastic volatility model. For the treatment of timer options under the 3/2 model we will rely on the path integral for the Morse potential, with the Heston model we will rely on the Kratzer potential.
E-info
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