In this paper, we study mathematical properties of a generalized bivariate
Ornstein-Uhlenbeck model for financial assets. Originally introduced by Lo and
Wang, this model possesses a stochastic drift term which influences the statistical
properties of the asset in the real (observable) world. Furthermore, we generali-
ze the model with respect to a time-dependent (but still non-random) volatility
function.
Although it is well-known, that drift terms - under weak regularity conditions -
do not affect the behaviour of the asset in the risk-neutral world and consequently
the Black-Scholes option pricing formula holds true, it makes sense to point out
that these regularity conditions are fulfilled in the present model and that option
pricing can be treated in analogy to the Black-Scholes case.
| Identifer | oai:union.ndltd.org:DRESDEN/oai:qucosa.de:bsz:ch1-200800572 |
| Date | 19 May 2008 |
| Creators | Krämer, Romy, Richter, Matthias |
| Contributors | TU Chemnitz, Fakultät für Mathematik |
| Publisher | Universitätsbibliothek Chemnitz |
| Source Sets | Hochschulschriftenserver (HSSS) der SLUB Dresden |
| Language | English |
| Detected Language | English |
| Type | doc-type:conferenceObject |
| Format | application/pdf, text/plain, application/zip |
| Relation | dcterms:isPartOfhttp://nbn-resolving.de/urn:nbn:de:bsz:ch1-200800505 |
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