Levy lognormal model

DBRUS · March 24th, 2008, 1:48 pm

Hi All,I am trying to price an Asian Basket option on futures.Does any one have an implementation of the lognormal valuation ( Levy)?Thanks

Keanu · March 25th, 2008, 1:03 pm

Sure, but this not a homework forum.

dobranszky · March 27th, 2008, 4:12 pm

In MATLAB working with vectors looks like that:function call = Levy(Fwd, Weight, Vol0, Corr, TTM, DF, Strike)% Levy, E. (1992) Pricing European average rate currency options. Journal% of International Money and Finance, 11, 474-491.%% function call = Levy(Fwd, Weight, Vol0, Corr, TTM, DF, Strike)M = Fwd * Weight';V = (Fwd .* Weight) * exp(Corr .* (Vol0' * Vol0) * TTM) * (Fwd .* Weight)';m = 2 * log(M) - 0.5 * log(V);v = log(V) - 2 * log(M);d1 = (m - log(Strike)) / sqrt(v) + sqrt(v);d2 = d1 - sqrt(v);call = DF * (M * normcdf(d1) - Strike * normcdf(d2));end