Characteristic Function Based Estimation of Lévy Tempered Stable Stock Price Models and Jump Market Price Calibration
In this paper,I investigate the fiexibility of the tempered stable process in modeling stock price dynamics and estimation of models. The models are estimated and calibrated by a two-step procedure using time-series stock price data and cross-sectional options data. I ?nd that the recently developed characteristic function based GMM with a continuum of moment conditions is more pertinent to estimating Lévy jump models. The estimate of stable index indicates that the tempered stable process acts as an infinite activity process but exhibits finite variation when modeling stock price process. The combining results of estimation and calibration show that when modeling stock price process,we do not need a Brownian motion to mix with the tempered stable process and the restricted tempered stable process is already rich enough to capture characteristics of returns and options. The daily calibration proves time-varying jump market price,which is very sensitive to jump amplitude. The market can give a definite and transparent price for jump in tranquil and turbulent periods,but can not give a consistent price in moderate period.
Tempered Stable Process Esscher Transform Jump Market Price CCF-CGMM
Junye LI
Ph.D student in Economics,Bocconi University,Via Sarfatti 25,20136,Milano
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）