FINANCIAL MODELING AND OPTION THEORY WITH THE TRUNCATED LEVY PROCESS

Financial Modeling and Option Theory with the Truncated Levy Process

In recent studies the truncated Levy process (TLP) has been shown to be very promising for the modeling of financial dynamics. In contrast to the Levy process, the TLP has finite moments and can account for both the previously observed excess kurtosis at short timescales, along with the slow convergence to Gaussian at longer timescales. In this paper I further test the truncated Levy paradigm u...

O ct 1 99 7 Financial Modeling and Option Theory with the Truncated Levy Process

In recent studies the truncated Levy process (TLP) has been shown to be very promising for the modeling of financial dynamics. In contrast to the Levy process, the TLP has finite moments and can account for both the previously observed excess kurtosis at short timescales, along with the slow convergence to Gaussian at longer timescales. I further test the truncated Levy paradigm using high freq...

Option pricing with Levy Process

In this paper, we assume that log returns can be modelled by a Levy process. We give explicit formulae for option prices by means of the Fourier transform. We explain how to infer the characteristics of the Levy process from option prices. This enables us to generate an implicit volatility surface implied by market data. This model is of particular interest since it extends the seminal Black Sc...

Financial Modeling and Option Theory with Thetruncated

Option pricing with Levy process using Mellin Transform

In this paper, we use Mellin transform to get the expression for the free boundary an price of an American finite-lived option, when the underlying is govern by the Levy process. We have also derived the free boundary and price of an American perpetual put as the limit of the preceded finite-lived option. We then show how to compute the price of an American option on a basket of stocks using Me...