Jump-diffusion
Pricing in electricity markets: a mean reverting jump diffusion model with seasonality
... This is, when α = 1 the process mean reverts to its equilibrium level over the next time step. In our case, the estimated parameter suggests it mean reverts very rapidly, in 0.84 days, this is, almost in a day. This is ...
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Game Russian Options for Double Exponential Jump Diffusion Processes
... In this paper, we deal with Game Russian options. Game Russian option is a contact that the seller and the buyer have the rights to cancel and to exercise it at any time, respectively. We present the pricing formula of ...
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Range-Based Threshold Spot Volatility Estimation for Jump Diffusion Models
... Abstract—We consider level-dependent volatility estimation for jump diffusion models and propose a range-based threshold spot volatility estimator with high frequency discrete obser- vations. Under some ...
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A Hybrid Importance Sampling Algorithm for Estimating VaR under the Jump Diffusion Model
... the jump-diffusion model [8], GARCH models [9], or the stochastic volatility model [10] instead of t ...the jump diffusion model, which as- sumes that the stock returns and the jump ...
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A New Binomial Tree Method for European Options under the Jump Diffusion Model
... The binomial tree method, first proposed by Cox, Ross and Rubinste [5] in 1979, is one of the most popular approaches to price options in diffusion mod- els. Nowadays, the binomial tree pricing method has been ...
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Convertible bond valuation in a jump diffusion setting with stochastic interest rates
... a jump diffusion model for the firm value with correlated stochastic interest rates, hence comprising four risk factors: the Brownian motion governing the diffusion part of the firm value, the ...
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Pricing Options in Jump Diffusion Models Using Mellin Transforms
... first jump diffusion process for modeling the behavior of stock ...work jump diffusions have be- come a very popular tool in modeling equity, foreign exchange and commodity ...non-pure jump ...
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On the calculation of price sensitivities with jump diffusion structure
... pure jump markets, in [KP04] the Poisson noise coming from the jump times is used, while in [BBM07] the authors differentiate with respect to both the jump times and the amplitude of the ...For ...
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VaR Optimal Risk Management in Regime Switching Jump Diffusion Models
... show the ability of regime-switching models to capture some peculiarities in the observed data, as firstly high- lighted in the seminal paper by Hamilton [4]. Since then, there has been a growing effort in applying ...
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A combined compact difference scheme for option pricing in the exponential jump diffusion models
... considered. Under this assumption the value of a European contingency claim satisfies a general “partial integro-differential equation” (PIDE). With a combined compact difference (CCD) scheme for the spatial discretization, ...
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Freight options: Price modelling and empirical analysis
... of jump terms in the spot freight process can flexibly describe extreme movements in the capesize, panamax and supramax sectors of the dry bulk ...the jump diffusion model by computing a number of ...
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Pricing vulnerable options with variable default boundary under jump diffusion processes
... Let (Ω, F, Q ) be a complete probability space and r be the instantaneous riskless rate. Jump processes are given to describe the discontinuous changes of prices. We will give the following assumptions underlying ...
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Analogy Making and the Structure of Implied Volatility Skew
... The Black-Scholes model assumes that an option can be perfectly replicated by a portfolio consisting of continuously adjusted proportions of the underlying stock and a risk-free asset. The cost of setting up this ...
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Convergence of the compensated split step θ method for nonlinear jump diffusion systems
... In Figure , we show the numerical solution by the CSSθ method with step size t = – and the ‘referenced exact solution’. we can easy to find that the CSSθ approximation and the ‘referenced exact solution’ make no ...
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The Impact of Utility Functions on The Equilibrium Equity Premium In A Production Economy With Jump Diffusion
... with jump diffusion under an arbitrary jump ...with jump diffusion under an arbitrary jump size if one is to consume exponentially or quadratically from an accumulating wealth ...
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On Optimal Sparse Control Problems Governed by Jump Diffusion Processes
... A framework for the optimal sparse-control of the probability density function of a jump-diffusion process is presented. This framework is based on the partial inte- gro-differential Fokker-Planck (FP) ...
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Duopolistic Competition and Capacity Choice with Jump Diffusion Process
... The large majority of real option game models focus on the investment timing without considering production capacity choice. However, in reality, production capacity decision is a key factor when one firm invests ...
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Derivatives pricing in a Markov chain jump diffusion setting
... So far we have looked at the pricing of derivatives on assets with price pro cesses governed by our Markov chain jump-diffusion model. We will now look at financial instruments whose payoffs are determined ...
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Stochastic Volatility Jump Diffusion Model for Option Pricing
... [1] S. L. Heston, “A Close Form Solution for Options with Stochastic Volatility with Applications to Bond and Cur- rency Options,” The Review of Financial Studies, Vol. 6, No. 2, 1993, pp. 327-343. ...
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A Comparative Study of Equilibrium Equity Premium under Discrete Distributions of Jump Amplitudes
... Jump Diffusion Option Valuation in Discrete Time was proposed by [5] and later developed by [6]-[16]. Multivariate jumps were superimposed on the binomial model of [17] to obtain a model with a limiting ...
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