Resumen
The paper develops a new class of financial market models. These models are based on generalized telegraph processes with alternating velocities and jumps occurring at switching velocities. The model under consideration is arbitrage-free and complete if the directions of jumps in stock prices are in a certain correspondence with their velocity and with the behaviour of the interest rate. A risk-neutral measure and arbitrage-free formulae for a standard call option are constructed. This model has some features of models with memory, but it is more simple.
Idioma original | Inglés estadounidense |
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Número de artículo | 72326 |
Publicación | Journal of Applied Mathematics and Stochastic Analysis |
Volumen | 2007 |
DOI | |
Estado | Publicada - 2007 |
Áreas temáticas de ASJC Scopus
- Estadística y probabilidad
- Modelización y simulación
- Matemáticas aplicadas