A JUMP-DIFFUSION WITH STOCHASTIC VOLATILITY AND INTEREST RATE | Science Publications

Journal of Mathematics and Statistics

Pairote Sattayatham¹  Paiboon Peeraparp¹ 

关键词: Time Changed Levy Process;    Calibration;    Stochastic Interest Rate;    Stochastic Volatility;    Jump-Diffusion;    Black and Scholes (BS);   

DOI  :  10.3844/jmssp.2013.43.50

学科分类：社会科学、人文和艺术（综合）

来源: Science Publications

【 摘 要 】

In this study, we present the application of Time Changed Levy method to model a jump-diffusion process with stochastic volatility and stochastic interest rate. We apply the Lewis Fourier transform method as well as the risk neutral expectation pricing method to derive a formula for a European option pricing. These combining methods give quite a short route to derive the formula and make it efficient to compute option prices. We also show the calibration of our model to the real market with global and local optimization algorithms.

【 授权许可】

Unknown