Option pricing with time-changed Lévy processes
نویسندگان
چکیده
منابع مشابه
Time-Changed Lévy Processes and Option Pricing
The classic Black-Scholes option pricing model assumes that returns follow Brownian motion, but return processes differ from this benchmark in at least three important ways. First, asset prices jump, leading to non-normal return innovations. Second, return volatilities vary stochastically over time. Third, returns and their volatilities are correlated, often negatively for equities. Time-change...
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We generalize the Piterbarg [1] model to include (1) bilateral default risk as in Burgard and Kjaer [2], and (2) jumps in the dynamics of the underlying asset using general classes of Lévy processes of exponential type. We develop an efficient explicit-implicit scheme for European options and barrier options taking CVA-FVA into account. We highlight the importance of this work in the context of...
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ژورنال
عنوان ژورنال: Applied Financial Economics
سال: 2013
ISSN: 0960-3107,1466-4305
DOI: 10.1080/09603107.2013.807024