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Persistent link: https://www.econbiz.de/10014497566
We explore the precise link between option prices in exponential Lévy models and the related partial integro-differential equations (PIDEs) in the case of European options and options with single or double barriers. We first discuss the conditions under which options prices are classical...
Persistent link: https://www.econbiz.de/10005390696
<Para ID="Par1">We obtain an explicit expression for the price of a vulnerable claim written on a stock whose predefault dynamics follows a Lévy-driven SDE. The stock jumps to zero at default with a hazard rate given by a negative power of the stock price. We recover the characteristic function of the terminal...</para>
Persistent link: https://www.econbiz.de/10010997058
For a family of functions G, we define the G-variation, which generalizes power variation; G-variation swaps, which pay the G-variation of the returns on an underlying share price F; and share-weighted G-variation swaps, which pay the integral of F with respect to G-variation. For instance, the...
Persistent link: https://www.econbiz.de/10010997066
We consider the problem of optimal investment in a risky asset, and in derivatives written on the price process of this asset, when the underlying asset price process is a pure jump Lévy process. The duality approach of Karatzas and Shreve is used to derive the optimal consumption and...
Persistent link: https://www.econbiz.de/10005613388
Persistent link: https://www.econbiz.de/10010539357
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We derive the density process of the minimal entropy martingale measure in the stochastic volatility model proposed by Barndorff-Nielsen and Shephard [2]. The density is represented by the logarithm of the value function for an investor with exponential utility and no claim issued, and a...
Persistent link: https://www.econbiz.de/10005390692
, we study its stationarity and moment properties. In particular, we exhibit a specific model which shares many properties …
Persistent link: https://www.econbiz.de/10005390712
In this paper we discuss the superreplication of derivatives in a stochastic volatility model under the additional assumption that the volatility follows a bounded process. We characterize the value process of our superhedging strategy by an optimal-stopping problem in the context of the...
Persistent link: https://www.econbiz.de/10005390718