Option pricing with time-changed Lévy processes

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Option pricing with time-changed Lévy processes

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Title: Option pricing with time-changed Lévy processes
Author: Klingler, Sven; Kim, Young Shin; Rachev, Svetlozar T.; Fabozzi, Frank J.
Abstract: In this paper, we introduce two new six-parameter processes based on time-changing tempered stable distributions and develop an option pricing model based on these processes. This model provides a good t to observed option prices. To demonstrate the advantages of the new processes, we conduct two empirical studies to compare their performance to other processes that have been used in the literature.
URI: http://hdl.handle.net/10398/9104
Date: 2015-01-26
Notes: Post print of Option pricing with time-changed Lévy processes. Applied Financial Economics, 23. 1231-1238. Stable URL to publisher: http://dx.doi.org/10.1080/09603107.2013.807024

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