In this paper, we propose an approach to modeling the jump component of a jump-diffusion model using a log mixture of normals distribution. We define explicitly theproperties of the distribution and use it to create an analytic formula for Europeanoption price. Numerous examples of applications...

The empirical relationship between the return of an asset and the volatility of the asset has been well documented in the financial literature. Named the leverage e ffect or sometimes risk-premium effect, it is observed in real data that, when the return of the asset decreases, the volatility...

We treat the problem of option pricing under the Stochastic Volatility (SV) model: the volatility of the underlying asset is a function of an exogenous stochastic process, typically assumed to be meanreverting. Assuming that only discrete past stock information is available, we adapt an...