The 3/2 model as a stochastic volatility approximation for a large-basket price-weighted index
We derive large-basket approximations of a price-weighted index whose component prices follow a single sector jump-diffusion model. As the basket size approaches infinity, a suitable average converges to a Black–Scholes model driven by the common factor process. We extend this by considering the beh...
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| Format: | Journal article |
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World Scientific Publishing
2015
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