The Finite Moment Log Stable Process and Option Pricing

By Peter P. Carr, Liuren Wu. 2003

521 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/57b17cedee71b9d166b3e63442b5293d7b0553dd

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Citations in the corpus

Asymptotics for Exponential Levy Processes and Their Volatility Smile: Survey and New Results (2012, background): “The resulting process is sometimes known as the maximally negatively skewed stable process, and has received some interest in the literature, see [29].”
UTILITY MAXIMIZATION IN AFFINE STOCHASTIC VOLATILITY MODELS (2010, methodology): “in the model by [ 7 ], which could be treated similarly as presented here.”
Asymptotics of Implied Volatility far from Maturity (2009, background): “Let T be a random time where the distribution of 1/T is uniform on [0, 1 ], and let”
A Didactic Note on Affine Stochastic Volatility Models (2006, methodology): “For a more exhaustive coverage of the literature, cf. DFS and Carr & Wu (2003) .”
Is Brownian motion necessary to model high-frequency data? (2010, background): “The log-price process is then a purely discontinuous Levy process with infinite activity jumps, or more generally is driven by such a process: see for example Madan and Seneta (1990), Eberlein and Keller (1995) and Carr and Wu (2003) .”
Pricing and Inference with Mixtures of Conditionally Normal Processes (2009, unknown): “…(1998), Ghysels, Patilea, Renault and Torrès (1997), Melick and Thomas (1997), Ait-Sahalia and Lo (1998), Bakshi and Madan (2000), Jondeau and Rockinger (2000), Campbell and Li (2002), Cont and da Fonseca (2002), Duan (2002), Ait-Sahalia and Duarte (2003), Carr and Wu (2003), Huang and Wu (2004)].”
Symmetry and duality in Lévy markets (2006, background): “It is worth noting that the finite moment log-stable (LS) model of Carr and Wu (2003) can be regarded as a limit case of the CGMY model with G¼ 0 (no exponential factor) and M ¼ 1 (no positive jumps).”
Approximation and Calibration of Short-Term Implied Volatilities under Jump-Diffusion Stochastic Volatility (2007, methodology): “C(θ, σ, τ) = K £ Λ1(θ;σ) √ τ + Λ2(θ;σ)τ + Λ3(θ;σ)τ √ τ +O(τ (2)) ¤ , (13)”
Analytically pricing European-style options under the modified Black-Scholes equation with a spatial-fractional derivative (2014, unknown): “To ensure that the underlying return has the support on the whole real line, the tail index α needs to be restricted to (1,2], as demonstrated in [3].”
Stochastic Skew in Currency Options (2007, unknown): “Our results on the nature of the jump specification for currency options are not as strong as those in Carr and Wu (2003) and Huang and Wu (2004) for equity index options.”
Resolution of Policy Uncertainty and Sudden Declines in Volatility (2017, methodology): “We define variance risk premia in the same way as introduced in Carr and Wu (2009), Todorov (2010), and Bollerslev and Todorov (2011): VRP(t, ⌧) = 1 ⌧ n Et ⇣ Z t+⌧ t f(Xs)ds ⌘ Et ⇣ Z t+⌧ t f(Xs)ds ⌘o”
Stochastic Risk Premiums, Stochastic Skewness in Currency Options, and Stochastic Discount Factors in International Economies (2008, background): “Carr and Wu (2003) show that a one-sided a-stable law without exponential dampening captures the S&P 500 index options price behavior well.”
Realizing smiles: Options pricing with realized volatility (2013, unknown): “(2008) and Christoffersen et al. (2010a).4 In Stentoft (2008) an Inverse Gaussian model of a 30-minute returns RV measure is used to price options on some individual stocks.”
A Bayesian Analysis of Return Dynamics with Lévy Jumps (2008, methodology): “Among α-stable processes, we choose the finite moment log-stable (hereafter LS) process of Carr and Wu (2003) in our analysis.”
Model Specification and Risk Premia: Evidence from Futures Options (2007, background): “Other approaches also find evidence for jumps in prices; see, for example, Aı̈t-Sahalia (2002), Carr and Wu (2003), and Huang and Tauchen (2005).”