Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/55515
Authors: 
Scalas, Enrico
Politi, Mauro
Year of Publication: 
2012
Series/Report no.: 
Economics Discussion Papers 2012-14
Abstract: 
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general formula for the martingale price of a European call option. A complete derivation of this result is presented by means of elementary probabilistic tools.
Subjects: 
Option pricing
high-frequency finance
high-frequency trading
computer trading
jump-diffusion models
pure-jump models
continuous time random walks
semi-Markov processes
JEL: 
G13
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type: 
Working Paper

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