Cliquet option pricing with Meixner processes
Volume 5, Issue 1 (2018), pp. 81–97
Pub. online: 12 February 2018
Type: Research Article
Open Access
Open Access
Received
27 September 2017
27 September 2017
Revised
2 January 2018
2 January 2018
Accepted
21 January 2018
21 January 2018
Published
12 February 2018
12 February 2018
Abstract
We investigate the pricing of cliquet options in a geometric Meixner model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a pure-jump Meixner–Lévy process yielding Meixner distributed log-returns. In this setting, we infer semi-analytic expressions for the cliquet option price by using the probability distribution function of the driving Meixner–Lévy process and by an application of Fourier transform techniques. In an introductory section, we compile various facts on the Meixner distribution and the related class of Meixner–Lévy processes. We also propose a customized measure change preserving the Meixner distribution of any Meixner process.
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