Option pricing with Levy-Stable processes generated by Leacutevy-Stable integrated variance

Cartea, Alvaro and Howison, S. (2009) Option pricing with Levy-Stable processes generated by Leacutevy-Stable integrated variance. Quantitative Finance 9 (4), pp. 397-409. ISSN 1469-7688.

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Official URL: http://dx.doi.org/10.1080/14697680902748506

Abstract

We show how to calculate European-style option prices when the log-stock price process follows a Leacutevy-Stable process with index parameter 1 ≤ agr ≤ 2 and skewness parameter -1 ≤ β ≤ 1. Key to our result is to model integrated variance RQUF_A_375020_O_XML_IMAGES\RQUF_A_375020_O_ILM0001.gif as an increasing Leacutevy-Stable process with continuous paths in T.

Metadata

Item Type:	Article
Keyword(s) / Subject(s):	Commodity markets, commodity prices, Leacutevy process, hedging techniques
School:	Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
Depositing User:	Administrator
Date Deposited:	01 Feb 2011 11:43
Last Modified:	17 Apr 2013 12:18
URI:	http://eprints.bbk.ac.uk/id/eprint/1927

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