A MULTIVARIATE VARIANCE GAMMA MODEL FOR FINANCIAL APPLICATIONS

Patrizia Semeraro

International Journal of Theoretical and Applied Finance (IJTAF), 2008, vol. 11, issue 01, 1-18

Abstract: In this paper we subordinate a multivariate Brownian motion with independent components by a multivariate gamma subordinator. The resulting process is a generalization of the bivariate variance gamma process proposed by Madan and Seneta [7], mentioned in Cont and Tankov [4] and calibrated in Luciano and Schoutens [5] as a price process. Our main contribution here is to introduce a multivariate subordinator with gamma margins. We investigate the process, determine its Lévy triplet and analyze its dependence structure. At the end we propose an exponential Lévy price model.

Keywords: Lévy processes; multivariate subordinators; dependence; multivariate asset modelling (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (36)

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DOI: 10.1142/S0219024908004701

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