Introduction to Lévy processes

with Rossella Agliardi
  • Andrea Pascucci
Part of the Bocconi & Springer Series book series (BS)

Abstract

The classical Black-Scholes model employs the Brownian motion as the driving stochastic process of asset prices. Empirical evidence has pointed out that such an assumption does not provide an accurate description of financial data and has promoted the development of more flexible models. This chapter presents the fundamentals of Lévy processes and option pricing under such stochastic processes. Since this chapter is intended as an informal introduction to Lévy processes, many of the proofs are omitted: for a complete treatment of the theory we refer to the classical monographs by Bertoin [44], Sato [297], Jacod and Shiryaev [184].

Keywords

Option Price Implied Volatility Characteristic Exponent Stochastic Volatility Model Compound Poisson Process 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Italia 2011

Authors and Affiliations

  • Andrea Pascucci
    • 1
  1. 1.Department of MathematicsUniversity of BolognaBologna

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