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Stochastic Volatility Jump-Diffusion Model for Option Pricing

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DOI: 10.4236/jmf.2011.13012    4,556 Downloads   10,109 Views   Citations

ABSTRACT

An alternative option pricing model is proposed, in which the asset prices follow the jump-diffusion model with square root stochastic volatility. The stochastic volatility follows the jump-diffusion with square root and mean reverting. We find a formulation for the European-style option in terms of characteristic functions of tail probabilities.

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N. Makate and P. Sattayatham, "Stochastic Volatility Jump-Diffusion Model for Option Pricing," Journal of Mathematical Finance, Vol. 1 No. 3, 2011, pp. 90-97. doi: 10.4236/jmf.2011.13012.

Conflicts of Interest

The authors declare no conflicts of interest.

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