Transcription of Jump-Diffusion Models for Asset Pricing in …
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Birge and V. Linetsky (Eds.),Handbooks in OR & MS, Vol. 15 Copyright 2008 Elsevier All rights reservedDOI: (07)15002-7 Chapter 2 Jump-Diffusion Models for Asset Pricing inFinancial KouDepartment of Industrial Engineering and Operations Research, Columbia this survey we shall focus on the following issues related to Jump-Diffusion mod-els for Asset Pricing in financial engineering. (1) The controversy over tailweight ofdistributions. (2) Identifying a risk-neutral Pricing measure by using the rational ex-pectations equilibrium. (3) Using Laplace transforms to Pricing options, includingEuropean call/put options, path-dependent options, such as barrier and lookback op-tions.
Ch. 2. Jump-Diffusion Models for Asset Pricing in Financial Engineering 75 structure models, and Chen and Kou (2005) for applications in credit risk and
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