Revisiting variance gamma pricing : an application to S&P500 index options

Mozumder, S and Sorwar, G ORCID: https://orcid.org/0000-0001-8778-7966 2015, 'Revisiting variance gamma pricing : an application to S&P500 index options' , International Journal of Financial Engineering, 2 (2) , #1550022.

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Abstract

We reformulate the Lévy-Kintchine formula to make it suitable for modelling the stochastic time-changing effects of Lévy processes. Using Variance-Gamma (VG) process as an example, it illustrates the dynamic properties of a Lévy process and revisits the earlier work of Geman (2002). It also shows how the model can be calibrated to price options under a Lévy VG process, and calibrates the model on recent S&P500 index options data. It then compares the pricing performance of Fast Fourier Transform (FFT) and Fractional Fourier Transform (FRFT) approaches to model calibration and investigates the trade-off between calibration performance and required calculation time.

Item Type:	Article
Schools:	Schools > Salford Business School
Journal or Publication Title:	International Journal of Financial Engineering
Publisher:	World Scientific
Refereed:	Yes
ISSN:	2424-7863
Related URLs:	Publication
Funders:	Non funded research
Depositing User:	G Sorwar
Date Deposited:	10 Jun 2015 17:57
Last Modified:	16 Feb 2022 16:33
URI:	https://usir.salford.ac.uk/id/eprint/34856

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