Advanced Search
MyIDEAS: Login

Pricing Options Under Jump-Diffusion Processes

Contents:

Author Info

  • David S. Bates
Registered author(s):

    Abstract

    This paper derives the appropriate characterization of asset market equilibrium when asset prices follow jump-diffusion processes, and develops this general methodology for pricing options on such assets. Specific restrictions on distributions and preferences are imposed, yielding a tractable option pricing model that is valid even when jump risk is systematic and non-diversifiable. The dynamic hedging strategies justifying the option pricing model are described. Comparisons are made throughout the paper to the analogous problem of pricing options under stochastic volatility.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Paper provided by Wharton School Rodney L. White Center for Financial Research in its series Rodney L. White Center for Financial Research Working Papers with number 37-88.

    as in new window
    Length:
    Date of creation:
    Date of revision:
    Handle: RePEc:fth:pennfi:37-88

    Contact details of provider:
    Postal: 3254 Steinberg Hall-Dietrich Hall, Philadelphia, PA 19104-6367
    Phone: (215) 898-7616
    Fax: (215) 573-8084
    Email:
    Web page: http://finance.wharton.upenn.edu/~rlwctr/
    More information through EDIRC

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Shang-Jin Wei, 1994. "Anticipations of Foreign Exchange Volatility and Bid-Ask Spreads," NBER Working Papers 4737, National Bureau of Economic Research, Inc.
    2. Jiang, G.J. & Sluis, P.J. van der, 2000. "Index Option Pricing Models with Stochastic Volatility and Stochastic Interest Rates," Discussion Paper 2000-36, Tilburg University, Center for Economic Research.
    3. Tim Bollerslev & Michael Gibson & Hao Zhou, 2007. "Dynamic Estimation of Volatility Risk Premia and Investor Risk Aversion from Option-Implied and Realized Volatilities," CREATES Research Papers 2007-16, School of Economics and Management, University of Aarhus.
    4. Santa-Clara, Pedro & Yan, Shu, 2004. "Jump and Volatility Risk and Risk Premia: A New Model and Lessons from S&P 500 Options," University of California at Los Angeles, Anderson Graduate School of Management qt5dv8v999, Anderson Graduate School of Management, UCLA.
    5. David S. Bates, 2001. "The Market for Crash Risk," NBER Working Papers 8557, National Bureau of Economic Research, Inc.
    6. Broadie, Mark & Chernov, Mikhail & Johannes, Michael, 2007. "Understanding Index Option Returns," CEPR Discussion Papers 6239, C.E.P.R. Discussion Papers.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fth:pennfi:37-88. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.