Option Pricing with Lévy-Stable Processes Generated by Lévy-Stable Integrated Variance
AbstractWe show how to calculate European-style option prices when the log-stock price process follows a Levy-Stable process with index parameter 1 â¤ Î± â¤ 2 and skewness parameter -1 â¤ Î² â¤ 1. Key to our result is to model integrated variance Â [image omitted] as an increasing Levy-Stable process with continuous paths in T.
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Bibliographic InfoPaper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 0602.
Date of creation: Feb 2006
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Other versions of this item:
- Alvaro Cartea & Sam Howison, 2009. "Option pricing with Levy-Stable processes generated by Levy-Stable integrated variance," Quantitative Finance, Taylor & Francis Journals, vol. 9(4), pages 397-409.
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