A relatively simple approach to correlating unit period returns of Lévy processes is developed. We write the Lévy process as a time changed Brownian motion and correlate the Brownian motions. It is shown that sample correlations understate the required correlation between the Brownian motions...

We look at the problem of pricing CoCo bonds where the underlying risky asset dynamics are given by a smile conform model, more precisely an exponential Lévy process incorporating jumps and heavy tails. A core mathematical quantity that is needed in closed form in order to produce an exact...

Models of dependence in asset returns with non-Gaussian marginals are investigated on ETF daily return data. The first is a full rank Gaussian copula. The second is a linear mixture of independent Lévy processes. The third correlates Gaussian components in a variance gamma representation. On a...