We present a new model where the distribution of innovations is a Normal variance-mean mixture. In the model, the mixing process follows an affine Garch model with Gamma innovations, then we obtain a recursive procedure for the characteristic function of the logprices and we evaluate a European call by inverse Fourier Transform. The model admits the Garch model with Gamma innovations and the Variance-Gamma model as special cases.

Mercuri, L. (2009). A new affine stochastic volatility model with normal variance - mean mixture [Working paper].

A new affine stochastic volatility model with normal variance - mean mixture

MERCURI, LORENZO
2009-09-29

Abstract

We present a new model where the distribution of innovations is a Normal variance-mean mixture. In the model, the mixing process follows an affine Garch model with Gamma innovations, then we obtain a recursive procedure for the characteristic function of the logprices and we evaluate a European call by inverse Fourier Transform. The model admits the Garch model with Gamma innovations and the Variance-Gamma model as special cases.
Working paper
Scientifica
Normal variance-mean mixture; Affine stochastic volatility model; Semi-analytical formula; Option pricing; Esscher Transform
English
Mercuri, L. (2009). A new affine stochastic volatility model with normal variance - mean mixture [Working paper].
Mercuri, L
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/8004
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