Template-type: ReDIF-Paper 1.0
Author-Name: Ole E. Barndorff-Nielsen
Author-Email:oebn@mi.aau.dk
Author-Workplace-Name:The Centre for Mathematical Physics and Stochastics (MaPhySto)
Author-Name: Neil Shephard
Author-Email:neil.shephard@nuffield.ox.ac.uk
Author-Homepage:http://www.nuff.ox.ac.uk/users/shephard/
Author-Workplace-Name:Nuffield College, Oxford
Author-Workplace-Homepage:http://www.nuff.ox.ac.uk/
Title:Normal modified stable processes
Abstract:
 This paper discusses two classes of distributions, and stochastic processes derived from them: modified stable (MS) laws and normal modified stable (NMS) laws.
 This extends corresponding results for the generalised inverse Gaussian (GIG) and generalised hypberbolic (GH) or normal generalised inverse Gaussian (NGIG) laws.  The wider
 framework thus established provides, in particular, for added flexibility in the modelling of the dynamics of financial time series, of importance especially as regards OU based stochastic volatility models for equities.
 In the special case of the tempered stable OU process an exact option pricing formula can be found, extending previous results based on the inverse Gaussian and gamma distributions.
Length:25pages
Creation-Date: 2001-06-10
Number:2001-W6
File-URL:http://www.nuff.ox.ac.uk/Economics/papers/2001/w6/nmsprocnew1.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0106