A Multivariate Jump-Driven Financial Asset Model

We discuss a Lévy multivariate model for financial assets which incorporates jumps, skewness, kurtosis and stochastic volatility. We use it to describe the behavior of a series of stocks or indexes and to study a multi-firm, value-based default model. Starting from an independent Brownian world, we introduce jumps and other deviations from normality, including non-Gaussian dependence. We use a stochastic time-change technique and provide the details for a Gamma change. The main feature of the model is the fact that opposite to other, non jointly Gaussian settings its risk neutral dependence can be calibrated from univariate derivative prices, providing a surprisingly good fit. JEL classification numbers: G12, G10.