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
1. Verfasser: IVANOV, ROMAN V.
Format: Artikel
Sprache:eng
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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.
ISSN:0219-0249
1793-6322
DOI:10.1142/S0219024918500188