Geodesic
On the sensitivity analysis of spread options using Malliavin calculus
Novi Sad Journal of Mathematics, Tome 53 (2023) no. 2.

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In this paper we derive tractable formulae for price sensitivities of two-dimensional spread options using Malliavin calculus. In particular, we consider spread options with asset dynamics driven by geometric Brownian motion and stochastic volatility models. Unlike the fast Fourier transform approach, the Malliavin calculus approach does not require the joint characteristic function of underlying assets to be known and is applicable to spread options with discontinuous payoff functions. The results obtained reveal that the Malliavin calculus approach gives the price sensitivities in terms of the expectation of spread option payoff functional multiplied with some random variables (Malliavin weights) which are independent of the payoff functional. The results show the flexibility of Mallavin calculus approach when applied to spread options.
Publié le :
DOI : 10.30755/NSJOM.12553
Classification : 60H07, 60G05, 60J60
Keywords: spread options, Malliavin derivatives, price sensitivities 
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Shadrack Makwena Kgomo; Farai Julius Mhlanga. On the sensitivity analysis of spread options using Malliavin calculus. Novi Sad Journal of Mathematics, Tome 53 (2023) no. 2. doi : 10.30755/NSJOM.12553. http://geodesic.mathdoc.fr/articles/10.30755/NSJOM.12553/

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