Correlated Time-Changed Lévy Processes

43 Pages Posted: 18 Aug 2018 Last revised: 15 Jun 2019

Date Written: June 14, 2019

Abstract

Carr and Wu (2004), henceforth CW, developed a framework that encompasses almost all of the continuous-time models proposed in the option pricing literature. Their main result hinges on the stopping time property of the time changes, but all of the models CW proposed for the time changes do not satisfy this assumption. In this paper, when the time changes are adapted, but not necessarily stopping times, we provide analogous results to CW. We show that our approach can be applied to all models in CW.

Keywords: Jumps, Time Changes, Business Time

JEL Classification: G10, G12, G13

Suggested Citation

Fallahgoul, Hasan A and Nam, Kihun, Correlated Time-Changed Lévy Processes (June 14, 2019). Available at SSRN: https://ssrn.com/abstract=3226748 or http://dx.doi.org/10.2139/ssrn.3226748

Hasan A Fallahgoul (Contact Author)

Monash University ( email )

Clayton Campus
Victoria, 3800
Australia

HOME PAGE: http://www.hfallahgoul.com

Kihun Nam

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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