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Zbl 1055.91524
Duffie, Darrell; Pan, Jun; Singleton, Kenneth
Transform analysis and asset pricing for affine jump-diffusions. (English)
[J] Econometrica 68, No. 6, 1343-1376 (2000). ISSN 0012-9682; ISSN 1468-0262/e

Summary: In the setting of `affine' jump-diffusion state processes, this paper provides an analytical treatment of a class of transforms, including various Laplace and Fourier transforms as special cases, that allow an analytical treatment of a range of valuation and econometric problems. Example applications include fixed-income pricing models, with a role for intensity-based models of default, as well as a wide range of option-pricing applications. An illustrative example examines the implications of stochastic volatility and jumps for option valuation. This example highlights the impact on option `smirks' of the joint distribution of jumps in volatility and jumps in the underlying asset price, through both jump amplitude and jump timing.

MSC 2000:: *91B28 Finance etc.
60J60 Diffusion processes

Cited in: Zbl 1229.91367 Zbl 1202.91325 Zbl 1199.91206 Zbl 1170.91480 Zbl 1100.91050

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