Towards a Delta-Gamma Sato Multivariate Model

35 Pages Posted: 18 Jan 2017

See all articles by Lynn Boen

Lynn Boen

University of Antwerp - Department of Mathematics and Computer Science

Florence Guillaume

Independent

Date Written: September 2, 2016

Abstract

In this paper, we propose a multivariate Lévy model as an extension of the univariate Difference of Gammas model introduced by Finlay and Seneta. The construction is based on the work of Mathai and Moschopoulos, where we model the log price gains and losses by separate Gamma processes, each containing a common and idiosyncratic components. Furthermore, we extend this multivariate model to the Sato setting, allowing for a better replication of the univariate option prices in both the strike and time-to-maturity dimensions. A numerical study reveals the advantages of these new types of multivariate models, compared to a multivariate VG model.

Keywords: Multivariate Asset Pricing, Difference of Gamma Processes, Difference of Gamma Sato

JEL Classification: G12, C00

Suggested Citation

Boen, Lynn and Guillaume, Florence, Towards a Delta-Gamma Sato Multivariate Model (September 2, 2016). Available at SSRN: https://ssrn.com/abstract=2900900 or http://dx.doi.org/10.2139/ssrn.2900900

Lynn Boen

University of Antwerp - Department of Mathematics and Computer Science ( email )

Prinsstraat 13
Antwerp, 2000
Belgium

Florence Guillaume (Contact Author)

Independent ( email )

No Address Available
United States

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