Compound renewal processes can be used as an approximate phenomenological model of tick-by-tick price fluctuations. An exact and explicit general formula is derived for the martingale price of a European call option written on a compound renewal process. The option price is obtained using the direct method of indicator functions. The applicability of this result is discussed.
A note on intraday option pricing / Scalas, E; Politi, M. - In: INTERNATIONAL JOURNAL OF APPLIED NONLINEAR SCIENCE. - ISSN 1752-2862. - 1:1(2013), pp. 76-86. [10.1504/IJANS.2013.052763]
A note on intraday option pricing
SCALAS E;
2013
Abstract
Compound renewal processes can be used as an approximate phenomenological model of tick-by-tick price fluctuations. An exact and explicit general formula is derived for the martingale price of a European call option written on a compound renewal process. The option price is obtained using the direct method of indicator functions. The applicability of this result is discussed.File allegati a questo prodotto
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