Browsing by Subject "Diffusion processes."

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Open Access
Continuous time counterpart of vector auto regression of term structure dynamics with jump diffusion processes
(2010) Aksu, Gülşah
The understanding of bond yields is important for several reasons such as forecasting, monetary and debt policies, derivative pricing and investment decisions. The existence of a huge literature on this subject is a clue on how lots of researchers are trying to improve modeling of bond yields. In this paper two of such improvements are presented and discussed. The first improvement to be discussed is by Ang and Piazzesi (2003) who have found out that inclusion of macro variables to the affine term structure models provides a better fit empirically. The second improvement by Das (1998) also provides a better fitting term structure model by modeling the underlying state variable following a jump process.
Open Access
Pricing perpetual American-type strangle option for merton's jump diffusion process
(2014) Onat, Ayşegül
A stock price Xt evolves according to jump diffusion process with certain parameters. An asset manager who holds a strangle option on that stock, wants to maximize his/her expected payoff over the infinite time horizon. We derive an optimal exercise rule for asset manager when the underlying stock is dividend paying and non-dividend paying. We conclude that optimal stopping strategy changes according to stock’s dividend rate. We also illustrate the solution on numerical examples.