CONT TANKOV FINANCIAL MODELLING WITH JUMP PROCESSES PDF

Scientific Research An Academic Publisher. Cont, R. Option price models such as the Black-Sholes and the binomial tree models rely on the assumption that the underlying asset price dynamics follow the GBM. Modeling the asset price dynamics by using the GBM implies that the log return of assets at particular time is normally distributed. Many studies on real data in the markets showed that the GBM fails to capture the characteristic features of asset price dynamics that exhibit heavy tails and excess kurtosis. In our study, a class of Levy process, which is called a variance gamma VG process, performs much better than GBM model for modeling the dynamics of those stock indices.

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Scientific Research An Academic Publisher. Cont, R. Option price models such as the Black-Sholes and the binomial tree models rely on the assumption that the underlying asset price dynamics follow the GBM. Modeling the asset price dynamics by using the GBM implies that the log return of assets at particular time is normally distributed. Many studies on real data in the markets showed that the GBM fails to capture the characteristic features of asset price dynamics that exhibit heavy tails and excess kurtosis.

In our study, a class of Levy process, which is called a variance gamma VG process, performs much better than GBM model for modeling the dynamics of those stock indices. However, valuation of financial instruments, e. Here, we propose a new approach to the valuation of European option. It is based on the conditional distribution of the VG process.

We also apply the path simulation model to value American options by assuming the underlying asset log return follow the VG process. Such a model is similar with that proposed by Tiley [1]. Simulation study shows that the proposed method performs well in term of the option price. Related Articles:. Date: November 26, Date: January 21, Date: October 25, Date: January 10, Date: July 30, Why Us?

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Financial modelling with jump processes, Cont, Tankov

Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. DOI: During the last decade, financial models based on jump processes have acquired increasing popularity in risk management and option pricing. Much has been published on the subject, but the technical nature of most papers makes them difficult for nonspecialists to understand, and the mathematical tools required for applications can be intimidating. View via Publisher. Save to Library.

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Financial modelling with jump processes

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Financial Modelling With Jump Processes

After presenting the necessary mathematics, the text presents theoretical, numerical, and empirical issues. While the emphasis is on demystifying technical difficulties so as to better understand applications, mathematical results are presented in a rigorous, though self-contained, manner, accessible to any reader having basic knowledge of the Black Scholes model. Concepts are illustrated through many numerical and empirical examples. To be successful, all finance professionals need a solid understanding of risk.

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