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Dependent jump processes with coupled Lévy measures

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  • Naoufel El-Bachir

    (ICMA Centre, University of Reading)

Abstract

I present a simple method for the modeling and simulation of dependent positive jump processes through a series representation. Each constituent process is represented by a series whose terms are equal to a transformation of the jump times of a standard Poisson process. The transformations are given by the inverses of the respective marginal Lévy tail mass integral functions. The dependence between the various constituent processes is given by a probabilistic copula for the inter-arrival times of the various standard Poisson processes.

Suggested Citation

  • Naoufel El-Bachir, 2008. "Dependent jump processes with coupled Lévy measures," ICMA Centre Discussion Papers in Finance icma-dp2008-03, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2008-03
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    File URL: http://www.icmacentre.ac.uk/files/icma/dp20083.pdf
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    References listed on IDEAS

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    1. Kallsen, Jan & Tankov, Peter, 2006. "Characterization of dependence of multidimensional Lévy processes using Lévy copulas," Journal of Multivariate Analysis, Elsevier, vol. 97(7), pages 1551-1572, August.
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