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Stochastic Volatility Jump-Diffusion Model for Option Pricing
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Journal of Mathematical Finance·Volume 01 (2011)·Pages 90–97·Published 25 November 2011·DOI10.4236/jmf.2011.13012
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Abstract
An alternative option pricing model is proposed, in which the asset prices follow the jump-diffusion model with square root stochastic volatility. The stochastic volatility follows the jump-diffusion with square root and mean reverting. We find a formulation for the European-style option in terms of characteristic functions of tail probabilities.
KeywordsJump-Diffusion ModelStochastic VolatilityCharacteristic FunctionOption Pricing
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