Joint Characteristic Function of Stock Log-Price and Squared Volatility in the Bates Model and Its Asset Pricing Applications

dc.contributor.author Zhylyevskyy, Oleksandr
dc.contributor.author Zhylyevskyy, Oleksandr
dc.contributor.department Economics
dc.date 2018-02-17T13:25:44.000
dc.date.accessioned 2020-06-30T02:06:14Z
dc.date.available 2020-06-30T02:06:14Z
dc.date.copyright Sun Jan 01 00:00:00 UTC 2012
dc.date.issued 2012-01-01
dc.description.abstract <p>The model of Bates specifies a rich, flexible structure of stock dynamics suitable for applications in finance and eco- nomics, including valuation of derivative securities. This paper analytically derives a closed-form expression for the joint conditional characteristic function of a stock’s log-price and squared volatility under the model dynamics. The use of the function, based on inverting it, is illustrated on examples of pricing European-, Bermudan-, and American-style options. The discussed approach for European-style derivatives improves on the option formula of Bates. The suggested approach for American-style derivatives, based on a compound-option technique, offers an alternative solution to exist- ing finite-difference methods</p>
dc.description.comments <p>This is an article from <em>Theoretical Economics Letters</em> 2 (2012): 400, doi:<a href="http://dx.doi.org/10.4236/tel.2012.24074" target="_blank">10.4236/tel.2012.24074</a>. Posted with permission.</p>
dc.format.mimetype application/pdf
dc.identifier archive/lib.dr.iastate.edu/econ_las_pubs/32/
dc.identifier.articleid 1031
dc.identifier.contextkey 8162547
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath econ_las_pubs/32
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/21522
dc.language.iso en
dc.source.bitstream archive/lib.dr.iastate.edu/econ_las_pubs/32/2012_Zhylyevskyy_JointCharacteristic.pdf|||Fri Jan 14 23:34:03 UTC 2022
dc.source.uri 10.4236/tel.2012.24074
dc.subject.disciplines Economics
dc.subject.disciplines Finance and Financial Management
dc.subject.keywords Bates Model
dc.subject.keywords Stochastic Volatility
dc.subject.keywords Jump-Diffusion
dc.subject.keywords Characteristic Function
dc.subject.keywords Option Pricing
dc.title Joint Characteristic Function of Stock Log-Price and Squared Volatility in the Bates Model and Its Asset Pricing Applications
dc.type article
dc.type.genre article
dspace.entity.type Publication
relation.isAuthorOfPublication 0b486763-f19d-4fc6-bdf9-d1adcf42bfff
relation.isOrgUnitOfPublication 4c5aa914-a84a-4951-ab5f-3f60f4b65b3d
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