A parsimonious model for intraday European option pricing

A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general formula for the martingale price of a European call option. A complete derivation of this result is presented by means of elementary probabilistic tools.

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Year of publication:	2012
Authors:	Scalas, Enrico ; Politi, Mauro
Institutions:	Institut für Weltwirtschaft (IfW)
Subject:	Option pricing \| high-frequency finance \| high-frequency trading \| computer trading \| jump-diffusion models \| pure-jump models \| continuous time random walks \| semi-Markov processes

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Extent:	application/pdf
Series:	Economics Discussion Papers. - ISSN 1867-8009.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2012-14
Classification:	G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009646512