Option Pricing with Jumps

Wilmott Magazine, pp. 50-58, November 2003

19 Pages Posted: 1 Jun 2009

See all articles by Artur Sepp

Artur Sepp

Sygnum Bank Asset Management

Igor Skachkov


Date Written: August 1, 2003


This paper discusses European option pricing under various discontinuous conditions: option and underlying prices as well as volatility and drift coefficients experience breaks. We consider vanilla and double-barrier options under double-exponential jump diffusion model with jump drift and jump volatility. Our approach consists in applying Laplace transform directly to the pricing equation with further computing option prices and risk parameters via numerical inversion of their Laplace transforms. We focus on simple close-form and quasi-close-form solutions.

Keywords: jump-diffusion, regime switching, Laplace transfrom, Barrier options

JEL Classification: C00,G00

Suggested Citation

Sepp, Artur and Skachkov, Igor, Option Pricing with Jumps (August 1, 2003). Wilmott Magazine, pp. 50-58, November 2003 , Available at SSRN: https://ssrn.com/abstract=1412340

Artur Sepp (Contact Author)

Sygnum Bank Asset Management ( email )

Uetlibergstrasse 134a
Zurich, 8045

HOME PAGE: http://artursepp.com

Igor Skachkov

Independent ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics