Annals of Finance

, Volume 7, Issue 2, pp 199–219 | Cite as

Option pricing under a Gamma-modulated diffusion process

  • Pilar Iglesias
  • Jaime San Martín
  • Soledad Torres
  • Frederi Viens
Research Article

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 pricing Gamma process Long memory 

JEL Classification

G1 G12 C22 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  • Pilar Iglesias
    • 1
  • Jaime San Martín
    • 2
  • Soledad Torres
    • 3
  • Frederi Viens
    • 4
  1. 1.Departamento de Estadística, Facultad de MatemáticasPontificia Universidad Católica de ChileSantiagoChile
  2. 2.Departamento de Ingeniería Matemática and CMM, UMI-CNRS 2807, Facultad de Ciencias Físicas y MatemáticasUniversidad de ChileSantiagoChile
  3. 3.CIMFAV-DEUV, Facultad de CienciasUniversidad de ValparaísoValparaisoChile
  4. 4.Statistics and Mathematics DepartmentPurdue UniversityWest LafayetteUSA

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