2008/10/28 by Michael Schmutz, Schmutz, Michael
Economics, Econometrics and Finance · Mathematics · #Complex Systems and Time Series Analysis #FOS: Economics and business #FOS: Mathematics #Financial Risk and Volatility Modeling #Pricing of Securities (q-fin.PR) #Probability (math.PR) #Stochastic processes and financial applications #math.PR #q-fin.PR
paper · pdf · doi:10.48550/arxiv.0810.5146
18 pages
openalex publication_date 2008/10/28 · arxiv created 2010/02/12 · arxiv updated 2010/02/26 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
It turns out that in the bivariate Black-Scholes economy Margrabe type options exhibit symmetry properties leading to semi-static hedges of rather general barrier options. Some of the results are extended to variants obtained by means of Brownian subordination. In order to increase the liquidity of the hedging instruments for certain currency options, the duality principle can be applied to set up hedges in a foreign market by using only European vanilla options sometimes along with a risk-less bond. Since the semi-static hedges in the Black-Scholes economy are exact, closed form valuation formulas for certain barrier options can be easily derived.