Option Pricing Driven by a Telegraph Process with Random Jumps
2012 ◽
Vol 49
(3)
◽
pp. 838-849
◽
Keyword(s):
In this paper we propose a class of financial market models which are based on telegraph processes with alternating tendencies and jumps. It is assumed that the jumps have random sizes and that they occur when the tendencies are switching. These models are typically incomplete, but the set of equivalent martingale measures can be described in detail. We provide additional suggestions which permit arbitrage-free option prices as well as hedging strategies to be obtained.
2012 ◽
Vol 49
(03)
◽
pp. 838-849
◽
2015 ◽
Vol 18
(01)
◽
pp. 1550007
◽
1990 ◽
Vol 29
(2)
◽
pp. 185-201
◽
2021 ◽
Vol 9
(3)
◽
pp. 77-93
Keyword(s):
2016 ◽
Vol 19
(02)
◽
pp. 1650014
◽
Numeraires, equivalent martingale measures and completeness in finite dimensional securities markets
1997 ◽
Vol 27
(3)
◽
pp. 283-294
◽
1998 ◽
Vol 30
(01)
◽
pp. 256-268
◽
1996 ◽
Vol 69
(1)
◽
pp. 262-277
◽