Quanto option pricing in the parsimonious Heston model

  • In this work we use the Parsimonious Multi–Asset Heston model recently developed in [Dimitroff et al., 2009] at Fraunhofer ITWM, Department Financial Mathematics, Kaiserslautern (Germany) and apply it to Quanto options. We give a summary of the model and its calibration scheme. A suitable transformation of the Quanto option payoff is explained and used to price Quantos within the new framework. Simulated prices are given and compared to market prices and Black–Scholes prices. We find that the new approach underprices the chosen options, but gives better results than the Black–Scholes approach, which is prevailing in the literature on Quanto options.

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

Share in Twitter Search Google Scholar
Metadaten
Author:G. Dimitroff, A. Szimayer, A. Wagner
URN (permanent link):urn:nbn:de:hbz:386-kluedo-16317
Serie (Series number):Berichte des Fraunhofer-Instituts für Techno- und Wirtschaftsmathematik (ITWM Report) (174)
Document Type:Report
Language of publication:English
Year of Completion:2009
Year of Publication:2009
Publishing Institute:Fraunhofer-Institut für Techno- und Wirtschaftsmathematik
GND-Keyword:Black–Scholes approach; Parsimonious Heston Model ; Quanto option
Faculties / Organisational entities:Fraunhofer (ITWM)
DDC-Cassification:510 Mathematik

$Rev: 12793 $