Exponential stock models driven by tempered stable processes
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arXiv
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| Format: | Preprint |
| Published: |
2019
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| _version_ | 1866917094068584448 |
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| author | Küchler, Uwe Tappe, Stefan |
| author_facet | Küchler, Uwe Tappe, Stefan |
| contents | We investigate exponential stock models driven by tempered stable processes, which constitute a rich family of purely discontinuous Lévy processes. With a view of option pricing, we provide a systematic analysis of the existence of equivalent martingale measures, under which the model remains analytically tractable. This includes the existence of Esscher martingale measures and martingale measures having minimal distance to the physical probability measure. Moreover, we provide pricing formulae for European call options and perform a case study. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_1907_05142 |
| institution | arXiv |
| publishDate | 2019 |
| record_format | arxiv |
| spellingShingle | Exponential stock models driven by tempered stable processes Küchler, Uwe Tappe, Stefan Mathematical Finance Probability 60G51, 91G20 We investigate exponential stock models driven by tempered stable processes, which constitute a rich family of purely discontinuous Lévy processes. With a view of option pricing, we provide a systematic analysis of the existence of equivalent martingale measures, under which the model remains analytically tractable. This includes the existence of Esscher martingale measures and martingale measures having minimal distance to the physical probability measure. Moreover, we provide pricing formulae for European call options and perform a case study. |
| title | Exponential stock models driven by tempered stable processes |
| topic | Mathematical Finance Probability 60G51, 91G20 |
| url | https://arxiv.org/abs/1907.05142 |