A SHOT NOISE MODEL FOR FINANCIAL ASSETS

In this article we propose and study a model for stock prices which allows for shot-noise effects. This means that abrupt changes caused by jumps may fade away as time goes by. This model is incomplete. We derive the minimal martingale measure in discrete and continuous time and discuss the associated hedging strategy. Finally, a simulation study is included to show that our model is able to produce smile effects.

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Year of publication:	2008
Authors:	ALTMANN, TIMO ; SCHMIDT, THORSTEN ; STUTE, WINFRIED
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 11.2008, 01, p. 87-106
Publisher:	World Scientific Publishing Co. Pte. Ltd.
Subject:	Shot-noise component \| jump diffusion \| minimal martingale measure

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Extent:	application/pdf text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004971769