RT Journal Article
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 assets assumes that the underlying dynamics of equityprices follow a jump process or a Lévy process. This is done to incorporate rare or extreme events not captured byGaussian models. Of those financial models proposed, the most interesting include the CGMY, KoBoL and FMLS. All ofthese capture some of the most important characteristics of the dynamics of stock prices. In this article we show that forthese particular Lévy processes, the prices of financial derivatives, such as European-style options, satisfy a fractionalpartial differential equation (FPDE). As an application, we use numerical techniques to price exotic options, in particularbarrier options, by solving the corresponding FPDEs derived
PB Elsevier
SN 0378-4371
YR 2007
FD 2007-02
LK http://hdl.handle.net/10016/12179
UL http://hdl.handle.net/10016/12179
LA eng
DS e-Archivo
RD 28 abr. 2024