Option Pricing under a Mean Reverting Process with Jump-Diffusion and Jump Stochastic Volatility

Nonthiya Makate, Pairote Sattayatham

Abstract

An alternative option pricing model is proposed, in which the asset prices follow the jump-diffusion and exhibits mean reversion. The stochastic volatility follows the jump-diffusion with mean reversion. We find a formulation for the European-style option in terms of characteristic functions.