Pricing Vulnerable Basket-Spread Options in Multivariate Variance Gamma Models

In this article, we investigate the pricing of vulnerable basket-spread options under multivariate variance gamma models. We derive a pricing formula in integral form and, by applying Gauss–Hermite and generalized Gauss–Laguerre quadrature rules, reformulate it as a weighted sum, which allows for efficient numerical implementation. Numerical experiments show that the proposed approximate pricing formula achieves high accuracy. In addition, we investigate the effects of default risk and skewness on option prices.

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Publication Details

Journal
The Journal of Derivatives
Published
2026-04-16
DOI
https://doi.org/10.3905/jod.2026.005
Primary Topic
Stochastic processes and financial applications
Type
article
Field-Weighted Citation Impact
0.00
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article

Pricing Vulnerable Basket-Spread Options in Multivariate Variance Gamma Models

Xianda Qian, Qin Wang, Xingchun Wang
The Journal of Derivatives
Stochastic processes and financial applications
article

Pricing Vulnerable Basket-Spread Options in Multivariate Variance Gamma Models

Xianda Qian, Qin Wang, Xingchun Wang
article en

Abstract

In this article, we investigate the pricing of vulnerable basket-spread options under multivariate variance gamma models. We derive a pricing formula in integral form and, by applying Gauss–Hermite and generalized Gauss–Laguerre quadrature rules, reformulate it as a weighted sum, which allows for efficient numerical implementation. Numerical experiments show that the proposed approximate pricing formula achieves high accuracy. In addition, we investigate the effects of default risk and skewness on option prices.

The Journal of Derivatives
University of International Business and Economics (CN), Renmin University of China (CN)
Reduced inequalities
Openalex Percentile: Top 5%
Stochastic processes and financial applications
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