Jump-Diffusion Models*

Raymond H. Chan, Yves ZY. Guo, Spike T. Lee and Xun Li
Additional contact information
Raymond H. Chan: City University of Hong Kong
Yves ZY. Guo: BNP Paribas CIB
Spike T. Lee: The Chinese University of Hong Kong
Xun Li: The Hong Kong Polytechnic University

Chapter Chapter 26 in Financial Mathematics, Derivatives and Structured Products, 2024, pp 331-340 from Springer

Abstract: Abstract Market prices of financial assets often show jumps caused by unpredictable events or news. The market closing-opening is also a source of price jumps. The pure Brownian motion based diffusion models do not admit large asset price moves in a short period of time. Adding jumps to diffusion can show skewed distributions with fat tail that are difficult to produce by the BSM model.

Date: 2024
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DOI: 10.1007/978-981-99-9534-9_26

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