A Shot Noise Model For Financial Assets
AbstractIn this article we propose and study a model for stock prices which allows for shot-noise effects. This means that abrupt changes caused by jumps may fade away as time goes by. This model is incomplete. We derive the minimal martingale measure in discrete and continuous time and discuss the associated hedging strategy. Finally, a simulation study is included to show that our model is able to produce smile effects.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 11 (2008)
Issue (Month): 01 ()
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Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
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- Manuel Moreno & Pedro Jose Serrano & Winfried Stute, 2008.
"Statistical Properties and Economic Implications of Jump-Diffusion Processes with Shot-Noise Effects,"
Business Economics Working Papers
wb084912, Universidad Carlos III, Departamento de Economía de la Empresa.
- Moreno, Manuel & Serrano, Pedro & Stute, Winfried, 2011. "Statistical properties and economic implications of jump-diffusion processes with shot-noise effects," European Journal of Operational Research, Elsevier, vol. 214(3), pages 656-664, November.
- Fu, Jun & Yang, Hailiang, 2012. "Equilibruim approach of asset pricing under Lévy process," European Journal of Operational Research, Elsevier, vol. 223(3), pages 701-708.
- Baranovski, Alexander L., 2012. "Calibration of factor models with equity data: parade of correlations," MPRA Paper 36300, University Library of Munich, Germany.
- Kai Kopperschmidt & Winfried Stute, 2009. "Purchase timing models in marketing: a review," AStA Advances in Statistical Analysis, Springer, vol. 93(2), pages 123-149, June.
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