A Closed-Form Approximation to the Stochastic-Volatility Jump-Diffusion Option Pricing Model

2010 ◽  
Author(s):  
Zhan Chen
Keyword(s):  
Option Pricing ◽  
Closed Form ◽  
Stochastic Volatility ◽  
Jump Diffusion ◽  
Pricing Model ◽  
Option Pricing Model ◽  
Closed Form Approximation

scholarly journals Good Volatility, Bad Volatility, and Option Pricing

2018 ◽  
Vol 54 (2) ◽  
pp. 695-727 ◽  
Author(s):  
Bruno Feunou ◽  
Cédric Okou
Keyword(s):  
Option Pricing ◽  
Stock Price ◽  
Asset Price ◽  
Jump Diffusion ◽  
Quadratic Variation ◽  
Pricing Model ◽  
Economic Gain ◽  
Underlying Asset ◽  
Model Free ◽  
Option Pricing Model

Advances in variance analysis permit the splitting of the total quadratic variation of a jump-diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions. To appraise the economic gain of this decomposition, we design a new and flexible option pricing model in which the underlying asset price exhibits distinct upside and downside semivariance dynamics driven by the model-free proxies of the variances. The new model outperforms common benchmarks, especially the alternative that splits the quadratic variation into diffusive and jump components.

THE BRITTEN-JONES AND NEUBERGER SMILE-CONSISTENT WITH STOCHASTIC VOLATILITY OPTION PRICING MODEL: A FURTHER ANALYSIS

2002 ◽  
Vol 05 (01) ◽  
pp. 1-31 ◽  
Author(s):  
ALESSANDRO ROSSI
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Pricing Model ◽  
Pricing Models ◽  
No Arbitrage ◽  
Option Pricing Model ◽  
Exotic Option ◽  
Exotic Option Pricing ◽  
Insight Into

In part of the recent financial literature, exotic option pricing models have been built by establishing a link with European-style options. All these models share the characteristic of being consistent with the observed market smile. They differ respect to the specification of the volatility process. This paper provides a deeper insight into the Britten-Jones and Neuberger (1999) smile-consistent no arbitrage with stochastic volatility option pricing model. Their approach is similar, in spirit, to that one of Derman and Kani (1997), but the implementation is simpler and faster. We explain the main features of the model by performing a set of exercises. In addition we propose some extensions of the model, which make it more flexible.

An application of closed-form GARCH option-pricing model on FTSE 100 option and volatility

2010 ◽  
Vol 20 (11) ◽  
pp. 899-910 ◽  
Author(s):  
YongChern Su ◽  
MingDa Chen ◽  
HanChing Huang
Keyword(s):  
Option Pricing ◽  
Closed Form ◽  
Pricing Model ◽  
Option Pricing Model

Analysis of a jump-diffusion option pricing model with serially correlated jump sizes

2017 ◽  
Vol 47 (4) ◽  
pp. 953-979
Author(s):  
Xenos Chang-Shuo Lin ◽  
Daniel Wei-Chung Miao ◽  
Wan-Ling Chao
Keyword(s):  
Option Pricing ◽  
Jump Diffusion ◽  
Pricing Model ◽  
Option Pricing Model ◽  
Jump Sizes
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