Unformatted text preview: Merton’s Jump-diﬀusion (MJD) models, I will show how L´ evy processes arise naturally to model the dynamics of stocks and will focus on their characteristic function in connection with Fourier Transforms. Fast Fourier Transform methods are then discussed to price options as presented by P. Carr (1999). I then address convergence issues and will present the results obtained for BS, MJD and Variance Gamma. Key words: L´ evy processes, Fourier Transform, Option pricing, Black-Scholes, Jump-Diﬀusion....
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This note was uploaded on 01/15/2012 for the course MAT 5939 taught by Professor Garreau during the Fall '11 term at FSU.
- Fall '11