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Non-Gaussian analytic option pricing: a closed formula for the L\'evy-stable model

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  • Jean-Philippe Aguilar
  • Cyril Coste
  • Jan Korbel

Abstract

We establish an explicit pricing formula for the class of L\'evy-stable models with maximal negative asymmetry (Log-L\'evy model with finite moments and stability parameter $1

Suggested Citation

  • Jean-Philippe Aguilar & Cyril Coste & Jan Korbel, 2016. "Non-Gaussian analytic option pricing: a closed formula for the L\'evy-stable model," Papers 1609.00987, arXiv.org, revised Nov 2017.
    • Handle: RePEc:arx:papers:1609.00987
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    References listed on IDEAS

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    1. Peter Carr & Liuren Wu, 2003. "The Finite Moment Log Stable Process and Option Pricing," Journal of Finance, American Finance Association, vol. 58(2), pages 753-777, April.
    2. S. R. Hurst & Eckhard Platen & S. T. Rachev, 1999. "Option pricing for a logstable asset price model," Published Paper Series 1999-2, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. repec:bla:jfinan:v:58:y:2003:i:2:p:753-778 is not listed on IDEAS
    4. Jérémy Poirot & Peter Tankov, 2006. "Monte Carlo Option Pricing for Tempered Stable (CGMY) Processes," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 13(4), pages 327-344, December.
    5. Hagen Kleinert & Jan Korbel, 2015. "Option Pricing Beyond Black-Scholes Based on Double-Fractional Diffusion," Papers 1503.05655, arXiv.org, revised Mar 2016.
    6. Kleinert, H. & Korbel, J., 2016. "Option pricing beyond Black–Scholes based on double-fractional diffusion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 449(C), pages 200-214.
    7. Mandelbrot, Benoit B, 1972. "Correction of an Error in "The Variation of Certain Speculative Prices" (1963)," The Journal of Business, University of Chicago Press, vol. 45(4), pages 542-543, October.
    8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    9. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Jean-Philippe Aguilar & Cyril Coste & Hagen Kleinert & Jan Korbel, 2016. "Regularization and analytic option pricing under $\alpha$-stable distribution of arbitrary asymmetry," Papers 1611.04320, arXiv.org, revised Nov 2016.

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