Application of Generalized Hyperbolic Lévy Motions to Finance

Ernst Eberlein ()
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Ernst Eberlein: Universität Freiburg, Institut für Mathematische Stochastik

A chapter in Lévy Processes, 2001, pp 319-336 from Springer

Abstract: Abstract In standard mathematical finance, Brownian motion plays the dominating role as driving process for modelling price movements. In order to achieve a better fit to real-life data it is, however, preferable to replace Brownian motion by a Lévy process. Generalized hyperbolic Lévy motions are processes which allow for an almost perfect fit to financial data. We discuss in detail what the consequences for asset price modelling and interest rate theory are. We also touch on aspects of multivariate and intraday modelling.

Keywords: Option Price; Forward Rate; Martingale Measure; Inverse Gaussian Distribution; Convolution Semigroup (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4612-0197-7_14

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DOI: 10.1007/978-1-4612-0197-7_14

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