Option Pricing for a Jump-Diffusion Model with General Discrete Jump-Size Distributions

Published Online:https://doi.org/10.1287/mnsc.2016.2522

References

  • Amin KI (1993) Jump diffusion option valuation in discrete time. J. Finance 48(5):1833–1863.CrossrefGoogle Scholar
  • Asmussen S, Avram F, Pistorius MR (2004) Russian and American put options under exponential phase-type Lévy models. Stochastic Processes Appl. 109(1):79–111.CrossrefGoogle Scholar
  • Ball CA, Torous WN (1983) A simplified jump process for common stock returns. J. Financial Quant. Anal. 18(1):53–65.CrossrefGoogle Scholar
  • Bates DS (1991) The crash of ’87: Was it expected? The evidence from options markets. J. Finance 46(3):1009–1044.CrossrefGoogle Scholar
  • Bates DS (2003) Empirical option pricing: A retrospection. Econometrics 116(1):387–404.CrossrefGoogle Scholar
  • Benninga S, Wiener Z (1998) Binomial term structure models. Mathematica Ed. Res. 7(3):1–10.Google Scholar
  • Black F, Scholes M (1973) The pricing of options and corporate liabilities. J. Political Econom. 81(3):637–654.CrossrefGoogle Scholar
  • Bollerslev T, Todorov V (2011) Estimation of jump tails. Econometrica 79(6):1727–1783.CrossrefGoogle Scholar
  • Bookstaber RM, McDonald JB (1987) A general distribution for describing security price returns. J. Bus. 60(3):401–424.CrossrefGoogle Scholar
  • Broadie M, Detemple J (2004) Option pricing: Valuation models and applications. Management Sci. 50(9):1145–1177.LinkGoogle Scholar
  • Cai N (2009) On first passage times of a hyper-exponential jump-diffusion process. Oper. Res. Lett. 37(2):127–134.CrossrefGoogle Scholar
  • Cai N, Kou S (2011) Option pricing under a mixed-exponential jump diffusion model. Management Sci. 57(11):2067–2081.LinkGoogle Scholar
  • Cai N, Kou SG, Liu Z (2014) A two-sided Laplace inversion algorithm with computable error bounds and its applications in financial engineering. Adv. Appl. Probab. 46:766–789.CrossrefGoogle Scholar
  • Carr P, Madan D (1999) Option pricing using the fast Fourier transform. J. Comput. Finance 2(4):61–73.CrossrefGoogle Scholar
  • Cont R, Tankov P (2004) Nonparametric calibration of jump-diffusion option pricing models. J. Computational Finance 7(3):1–49.CrossrefGoogle Scholar
  • Cox J, Ross S, Rubinstein M (1979) Option pricing: A simplified approach. J. Financial Econom. 7(3):229–263.CrossrefGoogle Scholar
  • Eraker B, Johannes M, Polson N (2003) The impact of jumps in volatility and returns. J. Finance 58(3):1269–1300.CrossrefGoogle Scholar
  • Feng L, Lin X (2013) Pricing Bermudan options in Lévy process models. SIAM J. Finan. Math. 4(1):474–493.CrossrefGoogle Scholar
  • Feng L, Linetsky V (2009) Computing exponential moments of the discrete maximum of a Lévy process and lookback options. Finance Stochastics 13(4):501–529.CrossrefGoogle Scholar
  • Garcia R, Ghysels E, Renault E (2010) The econometrics of option pricing. Aït-Sahalia Y, Hansen LP, eds. Handbook of Financial Econometrics, Vol. 1 (Elsevier Science, Amsterdam), 479–552.CrossrefGoogle Scholar
  • Harrison JM, Kreps DM (1979) Martingales and arbitrage in multiperiod securities markets. J. Econom. Theory 20(3):381–408.CrossrefGoogle Scholar
  • Harrison JM, Pliska SR (1981) Martingales and stochastic integrals in the theory of continuous trading. Stochastic Processes Their Appl. 11(3):215–260.CrossrefGoogle Scholar
  • Humpage OF (1997) Recent U.S. intervention: Is less more? Econom. Rev. (Cleveland) 33(3):2–10.Google Scholar
  • Jarrow RA, Rosenfeld ER (1984) Jump risks and the intertemporal capital asset pricing model. J. Bus. 57(3):337–351.CrossrefGoogle Scholar
  • Kaeck A (2013) Asymmetry in the jump-size distribution of the S&P 500: Evidence from equity and option markets. J. Econom. Dynam. Control 37(9):1872–1888.CrossrefGoogle Scholar
  • Kou SG (2002) A jump-diffusion model for option pricing. Management Sci. 48(8):1086–1101.LinkGoogle Scholar
  • Kou SG (2008a) Jump-diffusion models for asset pricing in financial engineering. Birge JR, Linetsky V, eds. Financial Engineering, Handbooks in Operations Research and Management Science, Vol. 15, Chap. 2 (Elsevier, Amsterdam), 73–116.Google Scholar
  • Kou SG (2008b) Discrete barrier and lookback options. Birge JR, Linetsky V, eds. Financial Engineering, Handbooks in Operations Research and Management Science, Vol. 15, Chap. 8 (Elsevier, Amsterdam), 343–373.Google Scholar
  • Kou SG, Wang H (2004) Option pricing under a double exponential jump diffusion model. Management Sci. 50(9):1178–1192.LinkGoogle Scholar
  • Laprise SB, Fu MC, Marcus SI, Lim AE, Zhang H (2006) Pricing American-style derivatives with European call options. Management Sci. 52(1):95–110.LinkGoogle Scholar
  • Li BQ, Zhao HJ (2009) Pricing Parisian options by generating functions. J. Derivatives 16(4):72–81.CrossrefGoogle Scholar
  • Madan D, Seneta E (1990) The variance gamma model of share market returns. J. Bus. 63(4):511–525.CrossrefGoogle Scholar
  • Merton RC (1976) Option pricing when underlying stock returns are discontinuous. J. Financial Econom. 3(1–2):125–144.CrossrefGoogle Scholar
  • Rachev ST, Höchstötter M, Fabozzi FJ, Focardi SM (2010) Discrete probabilities distributions. Probability and Statistics for Finance, Chap. 9 (John Wiley & Sons, Hoboken, NJ).CrossrefGoogle Scholar
  • Ramezani CA, Zeng Y (1998) Maximum likelihood estimation of asymmetric jump-diffusion processes: Application to security prices. Available at SSRN: http://ssrn.com/abstract=606361.Google Scholar
  • Samuelson PA (1973) Mathematics of speculative price. SIAM Rev. 15(1):1–42.CrossrefGoogle Scholar
  • Santos A, Guerra J (2015) Implied risk neutral densities from option prices: Hypergeometric, spline, lognormal, and Edgeworth functions. J. Futures Markets 35(7):655–678.CrossrefGoogle Scholar
  • Schoutens W (2003) Lévy Processes in Finance: Pricing Financial Derivatives (John Wiley & Sons, Chichester, UK).CrossrefGoogle Scholar
  • Tucker AL (1992) A reexamination of finite-variance and infinite-variance distributions as models of daily stock returns. J. Bus. Econom. Statist. 10(1):73–81.CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.