Chang, Charles; Fuh, Cheng-Der; Lin, Shih-Kuei - In: Journal of Banking & Finance 37 (2013) 8, pp. 3204-3217
We provide closed-form solutions for a continuous time, Markov-modulated jump diffusion model in a general equilibrium framework for options prices under a variety of jump diffusion specifications. We further demonstrate that the two-state model provides the leptokurtic return features,...