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- Title
Option pricing by mean correcting method for non-Gaussian Lévy processes.
- Authors
Yao, Luo Gen; Yang, Gang; Yang, Xiang Qun
- Abstract
For a non-Gaussian Lévy model, it is shown that if the model exists a trivial arbitrage-free interval, option pricing by mean correcting method is always arbitrage-free, and if the arbitrage-free interval is non-trivial, this pricing method may lead to arbitrage in some cases. In the latter case, some necessary and sufficient conditions under which option price is arbitrage-free are obtained.
- Subjects
OPTIONS (Finance); PRICING; ARITHMETIC mean; GAUSSIAN processes; LEVY processes; MATHEMATICAL models; ARBITRAGE
- Publication
Acta Mathematica Sinica, 2013, Vol 29, Issue 10, p1927
- ISSN
1439-8516
- Publication type
Article
- DOI
10.1007/s10114-013-2446-z