Option Pricing with Time-changed Lévy Processes

Sven Klingler, Young Shin Kim, Svetlozar T. Rachev, Frank J. Fabozzi

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Abstrakt

In this article, we introduce two new six-parameter processes based on time-changing tempered stable distributions and develop an option pricing model based on these processes. This model provides a good fit to observed option prices. To demonstrate the advantages of the new processes, we conduct two empirical studies to compare their performance to other processes that have been used in the literature.
OriginalsprogEngelsk
TidsskriftApplied Financial Economics
Vol/bind23
Udgave nummer15
Sider (fra-til)1231-1238
Antal sider8
ISSN0960-3107
DOI
StatusUdgivet - 2013

Emneord

  • Option pricing
  • Stochastic volatility
  • Stochastic-time change
  • Lévy processes
  • Tempered stable distributions

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