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European Option Pricing and Hedging Driven by the Levy Process(PDF)

南京师范大学学报（工程技术版）[ISSN:1006-6977/CN:61-1281/TN]

Issue:
2007年01期
Page:
78-84
Research Field:
Publishing date:

Info

Title:
European Option Pricing and Hedging Driven by the Levy Process
Author(s):
Huang Boqiang; Yang Jilong; Ma Shujian
1.School of Mathematics and Computer Science,Nanjing Normal University,Nanjing 210097,China;2.College of Zhong Bei,Nanjing Normal University,Nanjing 210097,China
Keywords:
option pric ing;  jum p-d iffusion process;  Levy process
PACS:
F224;F830
DOI:
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Abstract:
In financ ia lm athem atics, European-style option pr ic ing and hedg ing in a jump-diffusion m ode l a re often concerned. In the trad itiona l B lack-Scho les models, the stock price is dr iven by the Brown m o tion. It is a continuous random process. H ow ever, som e im po rtant events can lead to brusque var ia tions in pr ice. To m ode l th is kind of phenom ena, this paper introduces a d iscontinuous stochastic pro cessw he re theEuropean- sty le stock pr ice is dr iven by the Levy process. The r isk free rate and volatility are stochastic processes. By change o f probability m easure, under the probabilityQ, this paper obta ins a pric ing formu la and hedg ing o f European- sty le option in incom pletem arketm odels. The results of paper is genera,l and them ethod o f the paper is better.

References:

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Last Update: 2013-04-29