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arXiv · 1402.1554

Option Pricing for Symmetric L\'evy Returns with Applications

Kais Hamza·Fima C. Klebaner·Zinoviy Landsman·Ying-Oon Tan
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Abstract

This paper considers options pricing when the assumption of normality is replaced with that of the symmetry of the underlying distribution. Such a market affords many equivalent martingale measures (EMM). However we argue (as in the discrete-time setting of Klebaner and Landsman, 2007) that an EMM that keeps distributions within the same family is a "natural" choice. We obtain Black-Scholes type option pricing formulae for symmetric Variance-Gamma and symmetric Normal Inverse Gaussian models.

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Kais Hamza, Fima C. Klebaner, Zinoviy Landsman, Ying-Oon Tan. 2014-02-07. Option Pricing for Symmetric L\'evy Returns with Applications. https://arxiv.org/abs/1402.1554

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