A New Option Jump-Diffusion Model: A Simple Formula

A New Option Jump-Diffusion Model: A Simple Formula

Title

A New Option Jump-Diffusion Model: A Simple Formula

Authors

• Moawia Alghalith
  UWI, St Augustine
• Wing-Keung Wong
  Department of Finance, Quantum AI Research Center,
  Fintech & Blockchain Research Center,
  and Big Data Research Center, Asia University
  Department of Medical Research, China Medical University Hospital
  Business, Economic and Public Policy Research Centre,
  Hong Kong Shue Yan University
  The Economic Growth Centre, Nanyang Technological University
• Xiao Guang Yue
  European University Cyprus
• Christos Floros
  HellenicMid. University

Abstract

In this paper, we provide an alternative to the jump-diffusion option pricing models.
In doing so, we provide a simple, explicit formula that doesn’t require a computational
method. Furthermore, we introduce a new, simple method for solving partial integrodifferential
equation equations.

Keywords

Option pricing, Merton model, jump-diffusion, closed-form solution, partial integro- differential equation, the Black-Scholes formula

JEL Classication

G0

How to Cite

Alghalith, M., Wong, W.-K., Yue, X. G., & Floros, C. (2018). A New Option Jump-Diffusion Model: A Simple Formula. The International Journal of Finance, 30, 1–11.