Option Pricing Models built from Lévy Processes

An Empirical Comparison

Benoît Delahaut (Autor)

Buch | Softcover

76 Seiten

2014
AV Akademikerverlag
978-3-639-64081-6 (ISBN)

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This article seeks to studying two di erent methods of option pricing - one introduced in Carr and Madan (1999), and the other one in F. Fang and Oosterlee (2008) - suitable for stock prices following stochastic processes whose characteristic function is known. The advantage of these methods is that they do not require an explicit formula for the density function. For each method, we determine good computation parameters before comparing them in terms of e ciency and accuracy. As an intermediary step, and because the Carr-Madan method is not compatible with a customised strike grid, we study two interpolation methods : the linear and the natural cubic spline interpolations. We also discuss the calibration problem, explain why it is not as straightforward as it may seem, and compare the results obtained for both models.

Delahaut, BenoîtHolder of Master's Degrees in Mathematics (UCL, Belgium), Banking and Finance (Universidad de Alcala, Spain), and Quantitative Economics and Finance (St. Gallen University, Switzerland). Currently working as a Financial Analyst at Alena, a belgian multifamily office.

Erscheint lt. Verlag	11.8.2014
Sprache	englisch
Maße	150 x 220 mm
Gewicht	130 g
Themenwelt	Mathematik / Informatik ► Mathematik ► Wahrscheinlichkeit / Kombinatorik
Schlagworte	Calibration • cubic spline interpolation • Fast Fourier transform • Lévy process • Merton's model • Option pricing • Variance Gamma model
ISBN-10	3-639-64081-0 / 3639640810
ISBN-13	978-3-639-64081-6 / 9783639640816
Zustand	Neuware