par Bossens, Frédéric 
;Rayée, Grégory ;Skantzos, Nikos S.;Deelstra, Griselda
Référence International journal of theoretical and applied finance, 13, page (1293-1324), 8
Publication Publié, 2010-08-26
;Rayée, Grégory ;Skantzos, Nikos S.;Deelstra, Griselda Référence International journal of theoretical and applied finance, 13, page (1293-1324), 8
Publication Publié, 2010-08-26
Article révisé par les pairs
| Résumé : | We study Vanna-Volga methods which are used to price first generation exotic options in the Foreign Exchange market. They are based on a rescaling of the correction to the Black–Scholes price through the so-called “probability of survival” and the “expected first exit time”. Since the methods rely heavily on the appropriate treatment of market data we also provide a summary of the relevant conventions. We offer a justification of the core technique for the case of vanilla options and show how to adapt it to the pricing of exotic options. Our results are compared to a large collection of indicative market prices and to more sophisticated models. Finally we propose a simple calibration method based on one-touch prices that allows the Vanna-Volga results to be in line with our pool of market data. |
