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A General Subordinated Stochastic Process For Derivatives Pricing

Author

Listed:
  • J. Lesne
  • Jean-Luc Prigent

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract

A general subordinated stochastic process is proposed to model the dynamics of the underlying asset of an option. We prove that this class of models can be considered generically as the limit of discrete time models in which the number of transactions is random. We also derive several results for the valuation of contingent claims in this framework. In particular, we compare the impacts of different choices of subordinator processes on the option valuation.

Suggested Citation

  • J. Lesne & Jean-Luc Prigent, 2011. "A General Subordinated Stochastic Process For Derivatives Pricing," Post-Print hal-03679685, HAL.
    • Handle: RePEc:hal:journl:hal-03679685
    DOI: 10.1142/S0219024901000894
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    Cited by:

    1. Hentati Rania & Prigent Jean-Luc, 2011. "On the maximization of financial performance measures within mixture models," Statistics & Risk Modeling, De Gruyter, vol. 28(1), pages 63-80, March.
    2. Hentati-Kaffel, R. & Prigent, J.-L., 2016. "Optimal positioning in financial derivatives under mixture distributions," Economic Modelling, Elsevier, vol. 52(PA), pages 115-124.

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