We consider European options pricing with double jumps and stochastic volatility. We derived closed-form solutions for European call options in a double exponential jump-diffusion model with stochastic volatility SVDEJD . We developed fast and accurate numerical solutions by using fast Fourier transform FFT technique. We compared the density of our model with those of other models, including th...

The stochastic analysis is presented for the parameter estimation problem for fitting a theoretical jump-diffusion model to the log-returns from closing data of the Standard and Poor’s 500 (S&P500) stock index during the prior decade 1992-2001. The jump-diffusion model combines a the usual geometric Brownian motion for the diffusion and a space-time Poisson process for the jumps such that the j...

We propose a methodology to measure the parameter estimation risk and model specification of pricing models, as well selection classes, based on realized payoffs, for products in over-the-counter market. Lévy jump models affine jump-diffusion are applied estimating fair variance strikes swaps forward starting option prices. Our results show that both significant swaps, while is dominant when op...

This paper studies the modelling of large diversified portfolios in a financial market with jump-diffusion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk minimizing portfolios, and market indices. Reduced-form dynamics driven jointly by one Brownian Motion and one Poisson process are derived for the asymptotics of such portfolios. We prove that ...

The shift from a fossil-fuel to a hydrogen based transportation system requires sufficient supporting infrastructures. This paper develops a real option model to investigate the value of this investment opportunity which is able to handle the multiple uncertainties from market, political and technological aspects. The uncertain market and political uncertain factors will be transformed into a p...

In this paper we propose a jump-diffusion Libor model with jumps in a high-dimensional space (Rm) and test a stable non-parametric calibration algorithm which takes into account a given local covariance structure. The algorithm returns smooth and simply structured Lévy densities, and penalizes the deviation from the Libor market model. In practice, the procedure is FFT based, thus fast, easy to...

In this paper we study a classical option-based portfolio strategy which minimizes the Value-at-Risk of the hedged position in a continuous time, regime-switching jump-diffusion market, by using Fourier Transform methods. However, the analysis of this hedging strategy, as well as the computational technique for its implementation, is fairly general, i.e. it can be applied to any dynamical model...