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Option pricing with Lévy-Stable processes generated by Lévy-Stable Integrated Variance

Cartea, Alvaro and Howison, S. (2006) Option pricing with Lévy-Stable processes generated by Lévy-Stable Integrated Variance. Working Paper. Birkbeck, University of London, London, UK.

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Abstract

In this paper we show how to calculate European-style option prices when the log-stock price process follows a L´evy-Stable process with index parameter 1 ≤ α ≤ 2 and skewness parameter −1 ≤ β ≤ 1. Key to our result is to model integrated variance RT t σ2 sds as an increasing L´evy-Stable process with continuous paths.

Metadata

Item Type: Monograph (Working Paper)
Additional Information: BWPEF 0602
School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Depositing User: Administrator
Date Deposited: 28 Mar 2019 07:06
Last Modified: 13 Apr 2025 19:23
URI: https://eprints.bbk.ac.uk/id/eprint/26942

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