A jump telegraph model for option pricing

Nikita Ratanov

Research output: Contribution to journalArticle

33 Citations (Scopus)

Abstract

In this paper we introduce a financial market model based on continuous time random motions with alternating constant velocities and jumps occurring when the velocities are switching. This model is free of arbitrage if jump directions are in a certain correspondence with the velocities of the underlying random motion. Replicating strategies for European options are constructed in detail. Exact formulae for option prices are derived.
Original languageEnglish (US)
Pages (from-to)575-583
Number of pages9
JournalQuantitative Finance
DOIs
StatePublished - Oct 1 2007

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Jump
Option pricing
Arbitrage
Continuous time
Market model
Option prices
European options
Financial markets

Cite this

Ratanov, Nikita. / A jump telegraph model for option pricing. In: Quantitative Finance. 2007 ; pp. 575-583.
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A jump telegraph model for option pricing. / Ratanov, Nikita.

In: Quantitative Finance, 01.10.2007, p. 575-583.

Research output: Contribution to journalArticle

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