Vanilla Call Option Price in the Jump-Diffusion Model

Posted by Chun-Yuan Chiu

Input:

Show parameters of the jump-diffusion model (annulized)

Risk free interest rate
sigma
lambda
alpha
beta

Show inputs of the numerical method

Number of paths

The settings of the derivative

Initial underlying asset price
Strike price
Time to maturity Years
Output:
Call value

Pricing vanilla call options under Merton's jump-diffusion model with Monte Carlo method. In order to reduce the variance of the pricing result, we use as a control variate the vanilla call option under the Black-Scholes model.

Tagged: Monte Carlo, Vanilla Option, Merton Model, Jump-Diffusion Model, Levy Model, Control Variate

 •  Feb 16, 2014  • 

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