Option Pricing For Jump Diffusions: Approximations and Their Interpretation
AbstractWe derive a computable approximation for the value of a European call option when prices satisfy a jump-diffusion model with the coefficients depending explicitly on time. This is achieved by approximating the original coefficients with functions that are piecewise constant in time. We give an interpretation of the approximating option values, in particular in the context of a discrete-time model associated with the approximating continuous-time model. Copyright 1993 Blackwell Publishers.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Mathematical Finance.
Volume (Year): 3 (1993)
Issue (Month): 2 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627
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- Mulinacci, Sabrina, 1996. "An approximation of American option prices in a jump-diffusion model," Stochastic Processes and their Applications, Elsevier, vol. 62(1), pages 1-17, March.
- Gerald H.L. Cheang & Carl Chiarella, 2008. "Hedge Portfolios in Markets with Price Discontinuities," Research Paper Series 218, Quantitative Finance Research Centre, University of Technology, Sydney.
- Carl Chiarella & Christina Nikitopoulos Sklibosios & Erik Schlogl, 2007. "A Control Variate Method for Monte Carlo Simulations of Heath-Jarrow-Morton Models with Jumps," Applied Mathematical Finance, Taylor & Francis Journals, vol. 14(5), pages 365-399.
- Christina Nikitopoulos-Sklibosios, 2005. "A Class of Markovian Models for the Term Structure of Interest Rates Under Jump-Diffusions," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 6.
- Bao, Jianhai & Yuan, Chenggui, 2013. "Long-term behavior of stochastic interest rate models with jumps and memory," Insurance: Mathematics and Economics, Elsevier, vol. 53(1), pages 266-272.
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