Rights:
Atribución-NoComercial-SinDerivadas 3.0 España
Abstract:
In this paper we derive analytic expressions for the value of European Put and Call
options when the stock process follows an exponential Lévy-Stable process. It is shown
that the generalised Black-Scholes operator for the Lévy-Stable case can be obtained asIn this paper we derive analytic expressions for the value of European Put and Call
options when the stock process follows an exponential Lévy-Stable process. It is shown
that the generalised Black-Scholes operator for the Lévy-Stable case can be obtained as
an asymptotic approximation of a process where the random variable follows a Damped-
Lévy process. Finally, it is also shown that option prices under the Lévy-Stable case generate the volatility smile encountered in the financial markets when the Black-Scholes framework is employed[+][-]