This paper studies subordinate Ornstein-Uhlenbeck (OU) processes, i.e., OU diffusions time changed by L´evy subordinators. We construct their sample path decomposition, show that they possess mean-reverting jumps, study their equivalent measure transformations, and the spectral representation...

We characterize Ornstein-Uhlenbeck processes time changed with additive subordinators as time- inhomogeneous Markov semimartingales, based on which a new class of commodity derivative models is developed. Our models are tractable for pricing European, Bermudan and American futures options....

This paper considers pricing European options in a large class of one-dimensional Markovian jump processes known as subordinate diffusions, which are obtained by time changing a diffusion process with an independent Levy or additive random clock. These jump processes are non-Levy in general, and...