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Option pricing under jump diffusion model

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  • Qian Li
  • Li Wang

Abstract

We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series solution converges with a radius of convergence, and it is complemented by some numerical experiments to demonstrate its speed of convergence.

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  • Qian Li & Li Wang, 2023. "Option pricing under jump diffusion model," Papers 2305.10678, arXiv.org.
    • Handle: RePEc:arx:papers:2305.10678
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    References listed on IDEAS

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    7. repec:bla:jfinan:v:59:y:2004:i:1:p:227-260 is not listed on IDEAS
    8. David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305, World Scientific Publishing Co. Pte. Ltd..
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