A Jump-Diffusion Model for Option Pricing

Article OPEN
S. G. Kou;
  • Journal: Management Science, volume 48, issue 8 August, pages 1,086-1,101
  • Identifiers: doi: 10.1287/mnsc.48.8.1086.166
  • Subject: contingent claims, high peak, heavy tails, interest rate models, rational expectations, overreaction and underreaction

Brownian motion and normal distribution have been widely used in the Black--Scholes option-pricing framework to model the return of assets. However, two puzzles emerge from many empirical investigations: the leptokurtic feature that the return distribution of assets may... View more
Share - Bookmark