Câmara, António; Krehbiel, Tim; Li, Weiping - In: Journal of Banking & Finance 35 (2011) 1, pp. 215-230
This article presents a pure exchange economy that extends Rubinstein (1976) to show how the jump-diffusion option pricing model of Merton (1976) is altered when jumps are correlated with diffusive risks. A non-zero correlation between jumps and diffusive risks is necessary in order to resolve...