Pricing of Outer Performance Option under a Two-Factor Stochastic Volatility Jump-Diffusion Model
DOI:
https://doi.org/10.53469/jgebf.2025.07(06).09Keywords:
Double Heston Stochastic Volatility Model, Jump-Diffusion Model, Outer Performance Option, Fourier Inversion TransformAbstract
This study addresses the pricing of outer performance option within the framework of a two-factor stochastic volatility jump-diffusion model. By integrating martingale theory, partial differential equation (PDE) techniques, the Feynman-Kac theorem, and the Fourier inversion transform, we derive a semi-closed-form pricing formula for outer performance option. The methodology rigorously accounts for both stochastic volatility components and jump risk, thus providing a comprehensive solution to the complex valuation problem.
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Copyright (c) 2025 Wenmei Li

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