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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: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 28 Mar 2019 07:06
    Last Modified: 10 Feb 2021 21:26
    URI: https://eprints.bbk.ac.uk/id/eprint/26942

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