In financial literature many have been the attempts to overcome the option pricing drawbacks that affect the Black and Scholes model. Starting from the Tsallis deformation of the usual exponential function, this paper presents, in a complete market setup, a class of deformed geometric Brownian motions flexible enough to reproduce fat tails and to capture the volatility behavior observed in models that consider both stochastic volatility and jumps.

Moretto, E., Pasquali, S., & Trivellato, B. (2016). Option pricing under deformed Gaussian distributions. PHYSICA. A, 446(15 March 2016), 246-263 [10.1016/j.physa.2015.11.026].

Option pricing under deformed Gaussian distributions

MORETTO, ENRICO
;
2016

Abstract

In financial literature many have been the attempts to overcome the option pricing drawbacks that affect the Black and Scholes model. Starting from the Tsallis deformation of the usual exponential function, this paper presents, in a complete market setup, a class of deformed geometric Brownian motions flexible enough to reproduce fat tails and to capture the volatility behavior observed in models that consider both stochastic volatility and jumps.
Articolo in rivista - Articolo scientifico
Complete markets; Deformed exponential; Derivative pricing; Fat tails; Stochastic volatility; Tsallis exponential;
English
246
263
18
Moretto, E., Pasquali, S., & Trivellato, B. (2016). Option pricing under deformed Gaussian distributions. PHYSICA. A, 446(15 March 2016), 246-263 [10.1016/j.physa.2015.11.026].
Moretto, E; Pasquali, S; Trivellato, B
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/382331
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