Option bounds for multinomial stock returns in Jump-Diffusion processes - a Monte Carlo simulation for a multi-jump process

Radu Lupu ()

Journal for Economic Forecasting, 2006, vol. 3, issue 2, 58-71

Abstract: This paper addresses the problem of option bounds computation under the assumption that the price of the underlying asset follows a jump-diffusion Merton process as formulated in Perrakis (1993) extending the number of the jumps from one jump up and one jump down with fixed sizes to a finite number of jumps with sizes drawn from the lognormal distribution. The objective of this paper is to create a Monte Carlo simulation for the estimation of the bounds with various numbers of jumps and periods to maturity.

Keywords: Monte Carlo simulation; Jump-Diffusion processes; multi-jump process (search for similar items in EconPapers)
JEL-codes: C15 G12 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v:3:y:2006:i:2:p:58-71

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