Pricing dynamic fund protections for a hyperexponential jump diffusion process. Issue 1 (2nd January 2018)

• Record Type: Journal Article
• Authors: Qian, Linyi; Jin, Zhuo; Wang, Wei; Chen, Lyu
• Is Part Of: Communications in statistics. Volume 47:Issue 1(2018)
• Page Start: 210
• Page End: 221
• Publication Date: 2018-01-02
• Subjects: Dynamic fund protection -- Gaver–Stehfest algorithm -- Hyperexponential distribution.; 91G20 -- 60G51; Mathematical statistics -- Periodicals; Mathematics; Statistics; 519.2
• DOI: 10.1080/03610926.2017.1301475
• Languages: English
• ISSNs: 0361-0926

Abstract

ABSTRACT: This article deals with the valuation of dynamic fund protections (DFPs) under a jump diffusion model, where the jump size follows a hyperexponential distribution. The closed-form solution of the value of DFP is obtained in terms of Laplace transform. A numerical example is provided to show that the explicit solution is easy to implement by using the Gaver–Stehfest algorithm. Effects of key parameters are analyzed at last. The valuation method developed in this work can be used in pricing various variable annuities and path-dependent financial products.