Option Pricing with Bounded Expected Loss under Variance-Gamma ProcessesOption Pricing with Bounded Expected Loss under Variance-Gamma Processes
- Other Titles
- Option Pricing with Bounded Expected Loss under Variance-Gamma Processes
- Authors
- 송성주; 송종우
- Issue Date
- 2010
- Publisher
- 한국통계학회
- Keywords
- Option pricing; variance-gamma processes; weak convergence; incomplete market; bounded loss
- Citation
- Communications for Statistical Applications and Methods, v.17, no.4, pp.575 - 589
- Indexed
- KCI
- Journal Title
- Communications for Statistical Applications and Methods
- Volume
- 17
- Number
- 4
- Start Page
- 575
- End Page
- 589
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/118147
- ISSN
- 2287-7843
- Abstract
- Exponential Levy models have become popular in modeling price processes recently in mathematical finance. Although it is a relatively simple extension of the geometric Brownian motion, it makes the market incomplete so that the option price is not uniquely determined. As a trial to find an appropriate price for an option, we suppose a situation where a hedger wants to initially invest as little as possible, but wants to have the expected squared loss at the end not exceeding a certain constant. For this, we assume that the underlying price process follows a variance-gamma model and it converges to a geometric Brownian motion as its quadratic variation converges to a constant. In the limit, we use the mean-variance approach to find the asymptotic minimum investment with the expected squared loss bounded. Some numerical results are also provided.
- Files in This Item
- There are no files associated with this item.
- Appears in
Collections - College of Political Science & Economics > Department of Statistics > 1. Journal Articles
Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.