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Pricing Formula for Power Options with Jump-Diffusion |
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PP: 1313-1317 |
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doi:10.18576/amis/100410
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Author(s) |
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Siti Nur Iqmal Ibrahim,
John G. O’Hara,
Muhammad Syazwan Mohd Zaki,
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Abstract |
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| Payoff of a power option is typified by its underlying share price raised to a constant power. Also known as leveraged option,
a minor change in its underlying may lead to a significant change in its price. In this study, we derive pricing formula for power options
using the martingale approach when the underlying asset follows a jump-diffusion process. |
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