Research Article

Annals of Finance

, Volume 7, Issue 2, pp 199-219

First online:

Option pricing under a Gamma-modulated diffusion process

  • Pilar IglesiasAffiliated withDepartamento de Estadística, Facultad de Matemáticas, Pontificia Universidad Católica de Chile
  • , Jaime San MartínAffiliated withDepartamento de Ingeniería Matemática and CMM, UMI-CNRS 2807, Facultad de Ciencias Físicas y Matemáticas, Universidad de Chile Email author 
  • , Soledad TorresAffiliated withCIMFAV-DEUV, Facultad de Ciencias, Universidad de Valparaíso
  • , Frederi ViensAffiliated withStatistics and Mathematics Department, Purdue University

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We study a Gamma-modulated diffusion process as a long-memory generalization of the standard Black-Scholes model. This model introduces a time dependent volatility. The option pricing problem associated with this type of processes is computed.


Option pricing Gamma process Long memory

JEL Classification

G1 G12 C22