Annals of Finance

, Volume 7, Issue 2, pp 199–219

Option pricing under a Gamma-modulated diffusion process

Authors

  • Pilar Iglesias
    • Departamento de Estadística, Facultad de MatemáticasPontificia Universidad Católica de Chile
    • Departamento de Ingeniería Matemática and CMM, UMI-CNRS 2807, Facultad de Ciencias Físicas y MatemáticasUniversidad de Chile
  • Soledad Torres
    • CIMFAV-DEUV, Facultad de CienciasUniversidad de Valparaíso
  • Frederi Viens
    • Statistics and Mathematics DepartmentPurdue University
Research Article

DOI: 10.1007/s10436-011-0176-8

Cite this article as:
Iglesias, P., San Martín, J., Torres, S. et al. Ann Finance (2011) 7: 199. doi:10.1007/s10436-011-0176-8

Abstract

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.

Keywords

Option pricingGamma processLong memory

JEL Classification

G1G12C22

Copyright information

© Springer-Verlag 2011