Derivatives are alternative financial instruments which extend traders opportunities to achieve some financial goals. They are risk management instruments that are related to a data in the future, and also they react to uncertain prices. Study on pricing futures can provide useful tools to understand the stochastic behavior of prices to manage the risk of price volatility. Thus, this study eval...

The jump diffusion process has come to play an important role in many branches of science and industry. In their book [25], Øksendal and Sulem have studied the optimal control, optimal stopping and impulse control for jump diffusion processes. In mathematical finance theory, many researchers have developed option pricing theory, for example, Merton [24] was the first to use the jump process to ...

This paper treats the risk-averse optimal portfolio problem with consumption in continuous time for a stochastic-jump-volatility, jump-diffusion (SJVJD) model of the underlying risky asset and the volatility. The new developments are the use of the SJVJD model with logtruncated-double-exponential jump-amplitude distribution in returns and exponential jumpamplitude distribution in volatility for...

Computational methods for a jump-diffusion portfolio optimization application using a loguniform jump distribution are considered. In contrast to the usual geometric Brownian motion problem based upon two parameters, mean appreciation and diffusive volatility, the jumpdiffusion model will have at least five, since jump process needs at least a rate, a mean and a variance, depending on the jump-...

The primary goal of this paper is to price European options in the Merton’s framework with underlying assets following jump-diffusion using fuzzy set theory. Owing to the vague fluctuation of the real financial market, the average jump rate and jump sizes cannot be recorded or collected accurately. So the main idea of this paper is to model the rate as a triangular fuzzy number and jump sizes a...

In this paper, we aim at developing a model for option pricing to reduce the risks associated with Ethiopian commodity prices fluctuations. We used the daily closed Unwashed Lekempti grade 5 (ULK5) coffee and Whitish Wollega Sesame Seed Grade3 (WWSS3) prices obtained from Ethiopia commodity exchange (ECX) market to analyse the prices fluctuations.The natures of log-returns of the prices exhibit a...

Calculations of noise-assisted jump rates and diffusion coefficients for diffusion of atoms adsorbed on a metal surface are presented and discussed, in the whole range of the damping strength, and with a direct numerical integration of the Langevin equation, by two different procedures: a mean first passage time calculation and by counting jumps with a given energy criterion. The results are co...

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 have a higher peak and two (asymmetric) heavier tails than those of the normal distribution, and an empirical phenomenon called...

This paper presents everything you need to know about Merton jump diffusion (we call it MJD) model. MJD model is one of the first beyond Black-Scholes model in the sense that it tries to capture the negative skewness and excess kurtosis of the log stock price density ( ) 0 ln( / ) T S S P by a simple addition of a compound Possion jump process. Introduction of this jump process adds three extra...

Opinions, and subsequently opinion dynamics, depend not just on interactions among individuals, but also on external influences such as the mass media. The dependence on local interactions, however, has received considerably more attention. In this paper, we use the classical voter model as a basis, and extend it to include external influences. We show that this new model can be understood usin...