In this paper we study a conditional version of the Wang transform in the context of discrete GARCH models and their diffusion limits. Our first contribution shows that the conditional Wang transform and Duan's generalized local risk-neutral valuation relationship based on equilibrium...

In this article, we investigate the pricing and convergence of general non-affine non-Gaussian GARCH-based variance swap prices. Explicit solutions for fair strike prices under two different sampling schemes are derived using the extended Girsanov principle as our pricing kernel candidate....

An exchange option, also called “Margrabe option”, gives the right, but not the obligation to exchange an asset for another asset. In a recent paper in the Encyclopedia of Quantitative Finance (2010), Professor Rolf Poulsen writes that “[t]he Margrabe formula is still valid with stochastic...

Reformulating the results of del Baño Rollin, Ferreiro-Castilla, and Utzet (2010), we are able to give necessary and sufficient conditions for the moments of the stock price to exist and extend Theorem 2.1 of Forde and Jacquier (2011). Precisely Forde and Jacquier (2011) provide necessary...

In this paper, we propose a general framework for the valuation of options in stochas-tic local volatility (SLV) models with a general correlation structure, which includes the Stochastic Alpha Beta Rho (SABR) model and the quadratic SLV model as special cases. Standard stochastic volatility...