RT Generic
T1 Fractional diffusion models of option prices in markets with jumps
A1 Cartea, Álvaro
A1 Castillo Negrete, Diego del
AB Most of the recent literature dealing with the modeling of financial assetsassumes that the underlying dynamics of equity prices follow a jump process ora Lévy process. This is done to incorporate rare or extreme events not capturedby Gaussian models. Of those financial models proposed, the most interestinginclude the CGMY, KoBoL and FMLS. All of these capture some of the mostimportant characteristics of the dynamics of stock prices. In this article weshow that for these particular Lévy processes, the prices of financial derivatives,such as European-style options, satisfy a fractional partial differential equation(FPDE). As an application, we use numerical techniques to price exotic options,in particular barrier options, by solving the corresponding FPDEs derived
PB Birkbeck, University of London, School of Economics, Mathematics and Statistics
SN 1745-8587
YR 2006
FD 2006-08-11
LK https://hdl.handle.net/10016/12149
UL https://hdl.handle.net/10016/12149
LA eng
DS e-Archivo
RD 19 may. 2024