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.

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The Thai Journal of Mathematics organized and supported by The Mathematical Association of Thailand and Thailand Research Council and the Center for Promotion of Mathematical Research of Thailand (CEPMART).

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|ISSN 1686-0209|