Abstract

http://ssrn.com/abstract=227333
 
 

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Transform Analysis and Asset Pricing for Affine Jump-Diffusions


Darrell Duffie


Stanford University - Graduate School of Business

Jun Pan


Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER); China Academy of Financial Research (CAFR)

Kenneth J. Singleton


Stanford University-Graduate School of Business

April 1999

NBER Working Paper No. w7105

Abstract:     
In the setting of affine' jump-diffusion state processes, this paper provides an analytical treatment of a class of transforms, including various Laplace and Fourier transforms as special cases, that allow an analytical treatment of a range of valuation and econometric problems. Example applications include fixed-income pricing models, with a role for intensityy-based models of default, as well as a wide range of option-pricing applications. An illustrative example examines the implications of stochastic volatility and jumps for option valuation. This example highlights the impact on option 'smirks' of the joint distribution of jumps in volatility and jumps in the underlying asset price, through both amplitude as well as jump timing.

Number of Pages in PDF File: 45

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Date posted: June 11, 2000  

Suggested Citation

Duffie, Darrell and Pan, Jun and Singleton, Kenneth J., Transform Analysis and Asset Pricing for Affine Jump-Diffusions (April 1999). NBER Working Paper No. w7105. Available at SSRN: http://ssrn.com/abstract=227333

Contact Information

James Darrell Duffie (Contact Author)
Stanford University - Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-723-1976 (Phone)
650-725-7979 (Fax)

Jun Pan
Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )
77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
617-253-3083 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Kenneth J. Singleton
Stanford University-Graduate School of Business ( email )
Knight Management Center
655 Knight Way
Stanford, CA 94305-7298
United States
650-723-5753 (Phone)
HOME PAGE: http://www.stanford.edu/~kenneths
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Citations:  425
Footnotes:  26

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