Risk-neutral and Physical Jumps in Option Pricing

When jumps are present in the price dynamics of the underlying asset, the market is no longer complete, and a more general pricing framework than the risk-neutral valuation is needed. Using Monte Carlo simulation, we investigate the important diffrence between risk- neutral and physical jumps in option pricing, especially for medium- and long-term options.

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Year of publication:	2013-10-14
Authors:	Chen, Jian ; Liu, Xiaoquan ; Ma, Chenghu

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Series:	Working Paper.
Type of publication:	Book / Working Paper
Notes:	published Number 2013-10-14
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010892158