This paper investigates the valuation of currency options when the underlying currency follows a mean-reverting lognormal process with multi-scale stochastic volatility. A closed-form solution is derived for the characteristic function of the log-asset price. European options can then be valued...

This paper examines variance swap pricing using a model that integrates three major features of financial assets, namely the mean reversion in asset price, multi-factor stochastic volatility (SV) and simultaneous jumps in prices and volatility factors. Closed-form solutions are derived for...

Empirical evidence indicates that commodity prices are mean reverting and exhibit jumps. As some commodity option payoffs involve the arithmetic average of historical commodity prices, we derive an analytical solution to arithmetic Asian options under a mean reverting jump diffusion process. The...