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    Pure jump lévy processes for asset price modelling

    Geman, Helyette (2002) Pure jump lévy processes for asset price modelling. Journal of Banking & Finance 26 (7), pp. 1297-1316. ISSN 0378-4266.

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    Abstract

    The goal of the paper is to show that some types of Lévy processes such as the hyperbolic motion and the CGMY are particularly suitable for asset price modelling and option pricing. We wish to review some fundamental mathematic properties of Lévy distributions, such as the one of infinite divisibility, and how they translate observed features of asset price returns. We explain how these processes are related to Brownian motion, the central process in finance, through stochastic time changes which can in turn be interpreted as a measure of the economic activity. Lastly, we focus on two particular classes of pure jump Lévy processes, the generalized hyperbolic model and the CGMY models, and report on the goodness of fit obtained both on stock prices and option prices.

    Metadata

    Item Type: Article
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Sarah Hall
    Date Deposited: 09 Jun 2020 08:38
    Last Modified: 09 Jun 2020 08:38
    URI: https://eprints.bbk.ac.uk/id/eprint/32196

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