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research article
Polynomial Jump-Diffusion Models
2020
We develop a comprehensive mathematical framework for polynomial jump-diffusions in a semimartingale context, which nest affine jump-diffusions and have broad applications in finance. We show that the polynomial property is preserved under polynomial transformations and Lévy time change. We present a generic method for option pricing based on moment expansions. As an application, we introduce a large class of novel financial asset pricing models with excess log returns that are conditional Lévy based on polynomial jump-diffusions.
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Type
research article
Authors
Publication date
2020
Published in
Volume
10
Issue
1
Start page
71
End page
97
Peer reviewed
REVIEWED
EPFL units
Available on Infoscience
January 11, 2021