Derivative pricing using multivariate affine generalized hyperbolic distributions

Abstract

In this paper we use multivariate affine generalized hyperbolic (MAGH) distributions, introduced by Schmidt et al. (2006), to show how to price multidimensional derivatives when the underlying asset follows a MAGH distribution. We also illustrate the approach using market data from the BOVESPA (Sao Paulo Stock Exchange) and the exchange rate of the Brazilian Real vs. US Dollar to price some multidimensional derivatives. (C) 2010 Elsevier B.V. All rights reserved.