scholarly journals Option Pricing under the Double Exponential Jump-Diffusion Model with Stochastic Volatility and Interest Rate

2017 ◽  
Vol 2 (4) ◽  
pp. 252-289 ◽  
Author(s):  
Rongda Chen ◽  
Zexi Li ◽  
Liyuan Zeng ◽  
Lean Yu ◽  
Qi Lin ◽  
...  
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Stochastic Volatility ◽  
Diffusion Model ◽  
Jump Diffusion ◽  
Double Exponential ◽  
Jump Diffusion Model

scholarly journals Equilibrium Asset and Option Pricing under Jump-Diffusion Model with Stochastic Volatility

2013 ◽  
Vol 2013 ◽  
pp. 1-13 ◽  
Author(s):  
Xinfeng Ruan ◽  
Wenli Zhu ◽  
Shuang Li ◽  
Jiexiang Huang
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Diffusion Model ◽  
Jump Diffusion ◽  
Transformation Method ◽  
Exact Expression ◽  
Risk Neutral ◽  
Jump Diffusion Model ◽  
Fourier Transformation Method ◽  
Relationship Of

We study the equity premium and option pricing under jump-diffusion model with stochastic volatility based on the model in Zhang et al. 2012. We obtain the pricing kernel which acts like the physical and risk-neutral densities and the moments in the economy. Moreover, the exact expression of option valuation is derived by the Fourier transformation method. We also discuss the relationship of central moments between the physical measure and the risk-neutral measure. Our numerical results show that our model is more realistic than the previous model.

scholarly journals A Fast Fourier Transform Technique for Pricing European Options with Stochastic Volatility and Jump Risk

2012 ◽  
Vol 2012 ◽  
pp. 1-17 ◽  
Author(s):  
Su-mei Zhang ◽  
Li-he Wang
Keyword(s):  
Fourier Transform ◽  
Fast Fourier Transform ◽  
Stock Returns ◽  
Stochastic Volatility ◽  
Diffusion Model ◽  
Numerical Solutions ◽  
Jump Diffusion ◽  
European Options ◽  
Double Exponential ◽  
Jump Diffusion Model

We consider European options pricing with double jumps and stochastic volatility. We derived closed-form solutions for European call options in a double exponential jump-diffusion model with stochastic volatility (SVDEJD). We developed fast and accurate numerical solutions by using fast Fourier transform (FFT) technique. We compared the density of our model with those of other models, including the Black-Scholes model and the double exponential jump-diffusion model. At last, we analyzed several effects on option prices under the proposed model. Simulations show that the SVDEJD model is suitable for modelling the long-time real-market changes and stock returns are negatively correlated with volatility. The model and the proposed option pricing method are useful for empirical analysis of asset returns and managing the corporate credit risks.

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