Closed-Form Approximations for Spread Options in Lévy Markets

We provide new closed-form approximations for the pricing of spread options in three specific instances of exponential Lévy markets, i.e., when log-returns are modeled as Brownian motions (Black-Scholes model), Variance Gamma processes (VG model) or Normal Inverse Gaussian processes (NIG model). For the specific case of exchange options (spread options with zero strike), we generalize the well-known Margrabe formula (1978) that is valid in a Black-Scholes model to the VG model under a homogeneity assumption

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Year of publication:	2018
Authors:	Belle, Jente van
Other Persons:	Vanduffel, Steven (contributor) ; Yao, Jing (contributor)
Publisher:	[2018]: [S.l.] : SSRN
Subject:	Optionspreistheorie \| Option pricing theory \| Optionsgeschäft \| Option trading \| Stochastischer Prozess \| Stochastic process

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