In this paper we derive analytic expressions for the value of European Put and Call options when the stock process follows an exponential Levy-Stable process. It is shown that the generalised Black-Scholes operator for the Levy-Stable case can be obtained as an asymptotic approximation of a...

Using high frequency data for the price dynamics of equities we measure the impact that market microstructure noise has on estimates of the: (i) volatility of returns; and (ii) variance-covariance matrix of n assets. We propose a Kalman-filter-based methodology that allows us to deconstruct...

In this paper we show how to calculate European-style option prices when the log-stock and stock returns processes follow a symmetric Levy-Stable process. We extend our results to price European-style options when the log-stock process follows a skewed Levy-Stable process.

We present a spot price model for wholesale electricity prices which incorporates forward looking information that is available to all market players. We focus on information that measures the extent to which the capacity of the England and Wales generation park will be constrained over the next...