We study the skewness premium (SK) introduced by Bates [<italic>J. Finance</italic>, 1991, <bold>46</bold>(3), 1009-1044] in a general context using Lévy processes. Under a symmetry condition, Fajardo and Mordecki [<italic>Quant. Finance</italic>, 2006, <bold>6</bold>(3), 219-227] obtained that SK is given by Bates' <italic>x</italic>% rule. In this paper, we study SK...

<title>Abstract</title> This paper provides a new market implied calibration based on a moment matching methodology where the moments of the risk-neutral density function are inferred from at-the-money and out-the-money European vanilla option quotes. In particular, we derive a model-independent risk-neutral...

In this paper we investigate alternative Levy base correlation models that arise from the Gamma, Inverse Gaussian and CMY distribution classes. We compare these models with the basic (exponential) Levy base correlation model and the classical Gaussian base correlation model. For all investigated...

A Markov chain with an expanding non-uniform grid matching risk-neutral marginal distributions is constructed. Conditional distributions of the chain are in the variance gamma class with pre-specified skewness and excess kurtosis. Time change and space scale volatilities are calibrated from...

We discuss a Levy multivariate model for financial assets which incorporates jumps, skewness, kurtosis and stochastic volatility. We use it to describe the behaviour of a series of stocks or indexes and to study a multi-firm, value-based default model. Starting from an independent Brownian...

In this paper we discuss moment swaps. These derivatives depend on the realized higher moments of the underlying. A special case is the nowadays popular variance swaps. After introducing moment swaps we discuss how to hedge these derivatives. Moreover, we show how the classical hedge of the...