Monte Carlo Derivative Pricing With Partial Information In A Class Of Doubly Stochastic Poisson Processes With Marks
AbstractTo model intraday stock price movements we propose a class of marked doubly stochastic Poisson processes, whose intensity process can be interpreted in terms of the effect of information release on market activity. Assuming a partial information setting in which market agents are restricted to observe only the price process, a filtering algorithm is applied to compute, by Monte Carlo approximation, contingent claim prices, when the dynamics of the price process is given under a martingale measure. In particular, conditions for the existence of the minimal martingale measure Q are derived, and properties of the model under Q are studied.
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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): 15 (2012)
Issue (Month): 03 ()
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Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
Other versions of this item:
- Silvia Centanni & Marco Minozzo, 2010. "Monte Carlo derivative pricing with partial information in a class of doubly stochastic Poisson processes with marks," Working Papers 22/2010, University of Verona, Department of Economics.
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
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