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.
Digital Object Identifier (DOI)
Nur Iqmal Ibrahim, Siti; G. O’Hara, John; and Syazwan Mohd Zaki, Muhammad
"Pricing Formula for Power Options with Jump-Diffusion,"
Applied Mathematics & Information Sciences: Vol. 10
, Article 10.
Available at: https://dc.naturalspublishing.com/amis/vol10/iss4/10