Madan, Dilip B.; Pistorius, Martijn; Schoutens, Wim - In: Quantitative Finance 13 (2013) 1, pp. 125-136
A Markov chain with an expanding non-uniform grid matching risk-neutral marginal distributions is constructed. Conditional distributions of the chain are in the variance gamma class with pre-specified skewness and excess kurtosis. Time change and space scale volatilities are calibrated from...