We consider an option c which is contingent on an underlying (tilde S) that is not a traded asset. This situation typically arises in the context of real options. We investigate the situation when there is a "surrogate" traded asset S whose price process is highly correlated with that of (tilde...

We introduce a variant of the Barndorff-Nielsen and Shephard stochastic volatility model where the non Gaussian Ornstein-Uhlenbeck process describes some measure of trading intensity like trading volume or number of trades instead of unobservable instantaneous variance. We develop an explicit...