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Skewness Premium with Lévy Processes

Author

Listed:
  • José Fajardo

    (IBMEC Business School - Rio de Janeiro)

  • Ernesto Mordecki

    (Centro de Matemática, Facultad de Ciências, Universidad de la República, Uruguay)

Abstract

We study the skewness premium (SK) introduced by Bates (1991) in a general context using Lévy Processes. We obtain sufficient and necessary conditions for Bate's x% rule to hold. Then, we derive sufficient conditions for SK to be positive, in terms of the characteristic triplet of the Lévy Process under the risk neutral measure.

Suggested Citation

  • José Fajardo & Ernesto Mordecki, 2006. "Skewness Premium with Lévy Processes," IBMEC RJ Economics Discussion Papers 2006-04, Economics Research Group, IBMEC Business School - Rio de Janeiro.
    • Handle: RePEc:ibr:dpaper:2006-04
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    References listed on IDEAS

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    Cited by:

    1. Fajardo, José, 2016. "Power Style Contracts Under Asymmetric Lévy Processes," MPRA Paper 71813, University Library of Munich, Germany.
    2. Fajardo, José & Farias, Aquiles, 2010. "Derivative pricing using multivariate affine generalized hyperbolic distributions," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1607-1617, July.
    3. Ernst Eberlein & Antonis Papapantoleon & Albert Shiryaev, 2008. "On the duality principle in option pricing: semimartingale setting," Finance and Stochastics, Springer, vol. 12(2), pages 265-292, April.
    4. Fajardo, José & Mordecki, Ernesto, 2008. "Duality and Symmetry with Time-Changed Lévy Processes," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 28(1), May.

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    More about this item

    Keywords

    Skewness Premium; Lévy processes;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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