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Theory of Probability and Mathematical Statistics
Theory of Probability and Mathematical Statistics
ISSN 1547-7363(online) ISSN 0094-9000(print)

 

On pricing contingent claims in a two interest rates jump-diffusion model via market completions


Authors: S. Kane and A. Melnikov
Original publication: Teoriya Imovirnostei ta Matematichna Statistika, tom 77 (2007).
Journal: Theor. Probability and Math. Statist. 77 (2008), 57-69
MSC (2000): Primary 60H30, 62P05, 91B28; Secondary 60J75, 60G44, 91B30
Published electronically: January 14, 2009
MathSciNet review: 2432772
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Abstract: This paper deals with the problem of hedging contingent claims in the framework of a two factors jump-diffusion model with different credit and deposit rates. The upper and lower hedging prices are derived for European options by means of auxiliary completions of the initial market.


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Additional Information

S. Kane
Affiliation: Office of the Superintendant of Financial Institutions, Toronto, M5H3T9, Canada
Email: selly.kane@osfi-bsif.gc.ca

A. Melnikov
Affiliation: Department of Mathematical and Statistical Sciences, University of Alberta, Edmonton, T6G2G1, Canada
Email: melnikov@ualberta.ca

DOI: http://dx.doi.org/10.1090/S0094-9000-09-00747-9
PII: S 0094-9000(09)00747-9
Keywords: Constrained market, completion, hedging and pricing, jump-diffusion, different interest rates
Received by editor(s): November 13, 2006
Published electronically: January 14, 2009
Additional Notes: The paper was supported by the discovery grant NSERC #261855
Article copyright: © Copyright 2009 American Mathematical Society