Research Article Jump Telegraph Processes and Financial Markets with Memory
نویسنده
چکیده
The paper develops a new class of financial market models. These models are based on generalized telegraph processes with alternating velocities and jumps occurring at switching velocities. The model under consideration is arbitrage-free and complete if the directions of jumps in stock prices are in a certain correspondence with their velocity and with the behaviour of the interest rate. A risk-neutral measure and arbitrage-free formulae for a standard call option are constructed. This model has some features of models with memory, but it is more simple.
منابع مشابه
Telegraph models of financial markets
In this paper we develop a financial market model based on continuous time random motions with alternating constant velocities and with jumps occurring when the velocity switches. If jump directions are in the certain correspondence with the velocity directions of the underlying random motion with respect to the interest rate, the model is free of arbitrage and complete. Memory effects of this ...
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