NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Transform Analysis and Asset Pricing for Affine Jump-Diffusions

Darrell Duffie, Jun Pan, Kenneth Singleton

NBER Working Paper No. 7105
Issued in April 1999
NBER Program(s):   AP

In the setting of affine' jump-diffusion state processes, this paper provides an analytical treatment of a class of transforms, including various Laplace and Fourier transforms as special cases, that allow an analytical treatment of a range of valuation and econometric problems. Example applications include fixed-income pricing models, with a role for intensityy-based models of default, as well as a wide range of option-pricing applications. An illustrative example examines the implications of stochastic volatility and jumps for option valuation. This example highlights the impact on option 'smirks' of the joint distribution of jumps in volatility and jumps in the underlying asset price, through both amplitude as well as jump timing.

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Document Object Identifier (DOI): 10.3386/w7105

Published: Duffie, Darrell, Jun Pan and Kenneth Singleton. "Transform Analysis And Asset Pricing For Affine Jump-Diffusions," Econometrica, 2000, v68(6,Nov), 1343-1376. citation courtesy of

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