Option pricing when underlying stock returns are discontinuous

DOI10.1016/0304-405X(76)90022-2zbMATH Open1131.91344OpenAlexW2151065060WikidataQ29026334 ScholiaQ29026334MaRDI QIDQ5452379FDOQ5452379

Authors: Robert C. Merton 

Publication date: 3 April 2008

Published in: Journal of Financial Economics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/0304-405x(76)90022-2

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Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Cited In (only showing first 100 items - show all)

• Multifrequency jump-diffusions: An equilibrium approach
• Pricing European and American options in the Heston model with accelerated explicit finite differencing methods
• An inverse problem of determining the implied volatility in option pricing
• PRICING DISCRETELY MONITORED BARRIER OPTIONS AND DEFAULTABLE BONDS IN LÉVY PROCESS MODELS: A FAST HILBERT TRANSFORM APPROACH
• Equity correlations implied by index options: estimation and model uncertainty analysis
• ANALYTICAL PRICING OF DOUBLE-BARRIER OPTIONS UNDER A DOUBLE-EXPONENTIAL JUMP DIFFUSION PROCESS: APPLICATIONS OF LAPLACE TRANSFORM
• A class of Lévy process models with almost exact calibration to both barrier and vanilla FX options
• A multi-factor jump-diffusion model for commodities†
• INTENSITY‐BASED VALUATION OF RESIDENTIAL MORTGAGES: AN ANALYTICALLY TRACTABLE MODEL
• CREDIT SPREADS, OPTIMAL CAPITAL STRUCTURE, AND IMPLIED VOLATILITY WITH ENDOGENOUS DEFAULT AND JUMP RISK
• FOREIGN EXCHANGE OPTIONS UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES
• Stochastic volatility, smile & asymptotics
• VALUING EQUITY-LINKED DEATH BENEFITS IN A REGIME-SWITCHING FRAMEWORK
• Wavelet Galerkin pricing of American options on Lévy driven assets
• The implied volatility smirk
• Natural gas storage valuation and optimization: A real options application
• First passage times of a jump diffusion process
• Full Bayesian Analysis for a Class of Jump-Diffusion Models
• A new class of Bayesian semi-parametric models with applications to option pricing
• Model risk of contingent claims
• A Radial Basis Function Scheme for Option Pricing in Exponential Lévy Models
• A dimension and variance reduction Monte-Carlo method for option pricing under jump-diffusion models
• A discrete-time model for daily S\&P500 returns and realized variations: jumps and leverage effects
• The Markov Chain Market
• Generalized pricing formulas for stochastic volatility jump diffusion models applied to the exponential Vasicek model
• Option pricing under a gamma-modulated diffusion process
• Convergence of numerical schemes for viscosity solutions to integro-differential degenerate parabolic problems arising in financial theory
• A positivity-preserving numerical scheme for option pricing model with transaction costs under jump-diffusion process
• A new radial basis functions method for pricing American options under Merton's jump-diffusion model
• Estimating jump-diffusions using closed-form likelihood expansions
• A penalty method for a fractional order parabolic variational inequality governing American put option valuation
• A fast calibrating volatility model for option pricing
• The implication of missing the optimal-exercise time of an American option
• Electricity futures price models: calibration and forecasting
• General theory of geometric Lévy models for dynamic asset pricing
• Realized jumps on financial markets and predicting credit spreads
• Hermite polynomial based expansion of European option prices
• APPROXIMATING GARCH‐JUMP MODELS, JUMP‐DIFFUSION PROCESSES, AND OPTION PRICING
• A closed-form solution for options with ambiguity about stochastic volatility
• A jump to default extended CEV model: an application of Bessel processes
• Investment and financing for SMEs with a partial guarantee and jump risk
• Pricing derivatives with counterparty risk and collateralization: a fixed point approach
• A radial basis function based implicit-explicit method for option pricing under jump-diffusion models
• Better than pre-commitment mean-variance portfolio allocation strategies: a semi-self-financing Hamilton-Jacobi-Bellman equation approach
• On calibration of stochastic and fractional stochastic volatility models
• Incomplete financial markets and jumps in asset prices
• A hyper-Erlang jump-diffusion process and applications in finance
• Estimation of parameters of the Samuelson model with telegraph drift
• Optimal capital structure with an equity-for-guarantee swap
• Moments of integrated exponential Lévy processes and applications to Asian options pricing
• On option pricing under a completely random measure via a generalized Esscher transform
• A recombining lattice option pricing model that relaxes the assumption of lognormality
• Mean-variance portfolio selection with a stochastic cash flow in a Markov-switching jump-diffusion market
• Bubbles, shocks and elementary technical trading strategies
• Nonparametric tests for pathwise properties of semimartingales
• Medium-term planning for thermal electricity production
• Options pricing under the one-dimensional jump-diffusion model using the radial basis function interpolation scheme
• Optimal stopping, free boundary, and American option in a jump-diffusion model
• Properties of multinomial lattices with cumulants for option pricing and hedging
• Reliability computing and management considering the network traffic for a cloud computing
• Stochastic \(H_{2}/H_{\infty}\) control for Poisson jump-diffusion systems
• The evaluation of American options in a stochastic volatility model with jumps: an efficient finite element approach
• Maximum likelihood estimation of the double exponential jump-diffusion process
• Esscher transform and the duality principle for multidimensional semimartingales
• A reduced form framework for modeling volatility of speculative prices based on realized variation measures
• Radner equilibrium in incomplete Lévy models
• Real (investment) options with multiple sources of rare events
• Competing particle systems evolving by interacting Lévy processes
• Computing exponential moments of the discrete maximum of a Lévy process and lookback options
• Optimal algorithms for \(k\)-search with application in option pricing
• Algebraic invariance conditions in the study of approximate (null-)controllability of Markov switch processes
• Feynman-Kac for functional jump diffusions with an application to credit value adjustment
• Second order accurate IMEX methods for option pricing under Merton and Kou jump-diffusion models
• Exponential time integration and Chebychev discretisation schemes for fast pricing of options
• Pricing options under jump diffusion processes with fitted finite volume method
• Rational Krylov methods in exponential integrators for European option pricing.
• On first passage times of a hyper-exponential jump diffusion process
• Implicit-explicit numerical schemes for jump-diffusion processes
• Numerical analysis on binomial tree methods for a jump-diffusion model.
• Valuation of asset and volatility derivatives using decoupled time-changed Lévy processes
• Time-changed Markov processes in unified credit-equity modeling
• Valuation of continuously monitored double barrier options and related securities
• Time-changed Ornstein-Uhlenbeck processes and their applications in commodity derivative models
• Option pricing under jump-diffusion models with mean-reverting bivariate jumps
• A computational scheme for uncertain volatility model in option pricing
• Numerical approximations of optimal portfolios in mispriced asymmetric Lévy markets
• An extension of CreditGrades model approach with Lévy processes
• Valuing equity-linked death benefits in jump diffusion models
• Utility based pricing and hedging of jump diffusion processes with a view to applications
• Numerical valuation of options with jumps in the underlying
• A componentwise splitting method for pricing American options under the Bates model
• Continuous time mean-variance optimal portfolio allocation under jump diffusion: an numerical impulse control approach
• A penalty method for American options with jump diffusion processes
• Radial basis functions with application to finance: American put option under jump diffusion
• Hybrid Laplace transform and finite difference methods for pricing American options under complex models
• Prices and sensitivities of barrier and first-touch digital options in Lévy-driven models
• A finite difference scheme for pricing American put options under Kou's jump-diffusion model
• Approximate inversion of the Black-Scholes formula using rational functions
• Model-independent lower bound on variance swaps
• Risk-minimizing pricing and Esscher transform in a general non-Markovian regime-switching jump-diffusion model

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