OPTION PRICING IN THE VARIANCE-GAMMA MODEL UNDER THE DRIFT JUMP
This paper continues elements of the research direction of the work of Madan et al. [(1998) The variance gamma process and option pricing, European Finance Review 2, 79–105] and gives analytical expressions for the prices of digital and European call options in the variance-gamma model under the ass...
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Veröffentlicht in: | International journal of theoretical and applied finance 2018-06, Vol.21 (4), p.1850018 |
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Format: | Artikel |
Sprache: | eng |
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Online-Zugang: | Volltext |
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Zusammenfassung: | This paper continues elements of the research direction of the work of Madan et al. [(1998) The variance gamma process and option pricing, European Finance Review 2, 79–105] and gives analytical expressions for the prices of digital and European call options in the variance-gamma model under the assumption that the linear drift rate of stock log-returns can suddenly jump downwards. The time of the jump is taken to be exponentially distributed. The formulas obtained require the computation of some generalized hyperbolic functions. |
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ISSN: | 0219-0249 1793-6322 |
DOI: | 10.1142/S0219024918500188 |