Questions tagged [jump-diffusion]
The jump-diffusion tag has no usage guidance.
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Discretisation of Heston SV with Jumps (SVJ - Bates)
I want to simulate a price path of SVJ model (Bates) in Excel to see how it works in real time but I need help on how to discretise and construct the jump part with a Poisson process into Heston model ...
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The continuous-time limit of asset price processes where there is more than one asset
I've read Merton's article "On the Mathematics and Economics Assumptions of Continuous-Time Models" (Reprinted in Continuous-time Finance, Chapter 3), where Merton proved that the price of ...
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Diffusive Limits for compound poisson process
I was reading about compounded Hawkes process and came across diffusive limit theorems.
Where can I find diffusive limit theorems for Poisson processes.
I am new to this area, is there a nice ...
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Kou model — solving PIDE for European and American options in Python
Toivanen proposed$^\color{magenta}{\star}$ a method to solve the partial integro-differential equation (PIDE) with a numerical scheme based on Crank-Nicolson. In particular, he proposed an algorithm ...
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Kou model - can't reproduce prices of European Option from Toivanen and Forsyth [duplicate]
I have implemented the Kou option model for pricing vanilla option. I have checked that my program can replicate the price of the option in the original paper of 2002. However, when I use it to price ...
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What would be the practitioner way of hedging jump risks?
I have developed a keen interest in volatility strategies and have implemented various approaches based on practitioner delta. This delta is meticulously calibrated using a no-arbitrage implied ...
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Pure jump process in Duffie, Pan and Singleton's paper
In page 1349 or Section 2.1 of "Duffie, D., Pan, J., & Singleton, K. (2000). Transform Analysis and Asset Pricing for Affine Jump-Diffusions. Econometrica, 68(6), 1343-1376" the pure ...
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Is it possible to calibrate Mertons Jump Diffusion Model such that it matches mean and vola from a normal process without jumps? [closed]
I'm currently playing around with Mertons version of jump diffusion processes where i'm testing the predicitions of a trading model given a time series with and without jumps to isolate the effects of ...
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Does discretizing a diffusion model make it look like a jump diffusion model?
Can we distinguish a sample generated from a diffusion model with large time steps from a sample generated from a jump diffusion model. Not mathematically but numerically (if we ask a computer to tell ...
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Affine Jump Diffusion
I'm currently looking into affine jump-diffusions. I would like to get to know the literature better and I know the paper by Duffie, Pan, and Singleton (2000) is a very celebrated paper. Although I ...
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Stochastic volatility with jumps [closed]
I'm reading the Duffie, Pan, and Singleton (2000) paper now and I've stumbled upon something that seems to me as an inconsistency. Whenever I look up the SVJJ model, I see that its log-transform is ...
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Mixing formula for SVJ models
I am trying to understand the mixing formula (Hull and White formula) for stochastic volatility models with jumps in the asset price. One article which discusses this is Lewis, The mixing approach to ...
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Variance of the log returns in jump diffusion with time-varying jump sizes
I'm trying to calculate the variance $\mathrm{var}\left(\log\frac{S\left(t\right)}{S\left(0\right)}\right)$, where the dynamics of the stock $S$ follows a jump-diffusion process given by $$\frac{dS\...
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How do I estimate volatility for MPR historical data
How can I estimate volatility with historical data for Monetary Policy Rate (MPR) to use in a short rate model?
I could use regular techniques like simple standard deviation or max likelihood, but the ...
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How to solve numerically the IDE of GUILBAUD & PHAM model?
By the Guilbaud & Pham model (Optimal high frequency trading with limit and market orders, 2011), the authors said that integro-differential-equation (IDE)
can be easily solved by numerical method....
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