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A General Subordinated Stochastic Process For Derivatives Pricing

Author

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  • J. L. LESNE

    (THEMA, University of Cergy-Pontoise, 33 bd du Port 95000 Cergy, France)

  • J. L. PRIGENT

    (THEMA, University of Cergy-Pontoise, 33 bd du Port 95000 Cergy, France)

Abstract

A general subordinated stochastic process is proposed to model the dynamics of the underlying asset of an option. We prove that this class of models can be considered generically as the limit of discrete time models in which the number of transactions is random. We also derive several results for the valuation of contingent claims in this framework. In particular, we compare the impacts of different choices of subordinator processes on the option valuation.

Suggested Citation

  • J. L. Lesne & J. L. Prigent, 2001. "A General Subordinated Stochastic Process For Derivatives Pricing," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 121-146.
    • Handle: RePEc:wsi:ijtafx:v:04:y:2001:i:01:n:s0219024901000894
    DOI: 10.1142/S0219024901000894
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    Cited by:

    1. Hentati-Kaffel, R. & Prigent, J.-L., 2016. "Optimal positioning in financial derivatives under mixture distributions," Economic Modelling, Elsevier, vol. 52(PA), pages 115-124.
    2. Hentati Rania & Prigent Jean-Luc, 2011. "On the maximization of financial performance measures within mixture models," Statistics & Risk Modeling, De Gruyter, vol. 28(1), pages 63-80, March.

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