TITLE:
Stochastic Volatility Jump-Diffusion Model for Option Pricing
AUTHORS:
Nonthiya Makate, Pairote Sattayatham
KEYWORDS:
Jump-Diffusion Model, Stochastic Volatility, Characteristic Function, Option Pricing
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.1 No.3,
November
8,
2011
ABSTRACT: An alternative option pricing model is proposed, in which the asset prices follow the jump-diffusion model with square root stochastic volatility. The stochastic volatility follows the jump-diffusion with square root and mean reverting. We find a formulation for the European-style option in terms of characteristic functions of tail probabilities.