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Monte Carlo derivative pricing with partial information in a class of doubly stochastic Poisson processes with marks


Author Info

  • Silvia Centanni

    (Department of Economics (University of Verona))

  • Marco Minozzo

    (Department of Economics (University of Verona))


To 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 Info

Paper provided by University of Verona, Department of Economics in its series Working Papers with number 22/2010.

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Length: 34
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:ver:wpaper:22/2010

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Related research

Keywords: Minimal martingale measure; News arrival; Marked point process; Nonlinear filtering; Reversible jump Markov chain Monte Carlo; Ultra high frequency data;

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