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Option Pricing Model Based on Telegraph Processes with Jumps

Author

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  • Nikita Ratanov

Abstract

In this paper we overcome a lacks of Black-Scholes model, i.e. the infinite propagation velocity, the infinitely large asset prices etc. The proposed model is based on the telegraph process with jumps. The option price formula is derived.

Suggested Citation

  • Nikita Ratanov, 2004. "Option Pricing Model Based on Telegraph Processes with Jumps," Borradores de Investigación 4330, Universidad del Rosario.
    • Handle: RePEc:col:000091:004330
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    File URL: http://repository.urosario.edu.co/bitstream/handle/10336/10876/4330.pdf
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    Cited by:

    1. Nikita Ratanov, 2007. "A jump telegraph model for option pricing," Quantitative Finance, Taylor & Francis Journals, vol. 7(5), pages 575-583.
    2. Nikita Ratanov, 2005. "Quantil Hedging for telegraph markets and its applications to a pricing of equity-linked life insurance contracts," Borradores de Investigación 3410, Universidad del Rosario.
    3. Anatoliy A. Pogorui & Anatoliy Swishchuk & Ramón M. Rodríguez-Dagnino, 2021. "Transformations of Telegraph Processes and Their Financial Applications," Risks, MDPI, vol. 9(8), pages 1-21, August.

    More about this item

    Keywords

    Telegraph Processes; option pricing;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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