Benth, F. E.; Di Nunno, G.; Khedher, A.; Schmeck, M. D.
Pricing of spread options on a bivariate jump market and stability to model risk
We study the pricing of spread options and we obtain a Margrabe type formula for a general bivariate jump diffusion model. Moreover we study the robustness of the price to model risk, in the sense that we consider two types of bivariate jump diffusions: one allowing for infinite activity small jumps and one not. In the second one an adequate continuous component describes the small variation of prices. We illustrate our computations by several examples.