Al\`os type decomposition formula for Barndorff-Nielsen and Shephard model

Takuji Arai

Papers from arXiv.org

Abstract: The objective is to provide an Al\`os type decomposition formula of call option prices for the Barndorff-Nielsen and Shephard model: an Ornstein-Uhlenbeck type stochastic volatility model driven by a subordinator without drift. Al\`os (2012) introduced a decomposition expression for the Heston model by using Ito's formula. In this paper, we extend it to the Barndorff-Nielsen and Shephard model. As far as we know, this is the first result on the Al\`os type decomposition formula for models with infinite active jumps.

Date: 2020-05, Revised 2020-09
New Economics Papers: this item is included in nep-ore
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