December 2013
Intermediate to advanced
1200 pages
57h 13m
English
Content preview from Environment, Energy and Sustainable Development
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Environment, Energy and Sustainable Development – Sung, Kao & Chen (eds)
© 2014 Taylor & Francis Group, London, ISBN 978-1-138-00053-7
Knightian uncertainty and option pricing with jump volatility
Min Pan
School of Business Administration, China University of Petroleum (Beijing), Beijing, China
ABSTRACT: This paper deals with option pricing with jump volatility, which is described by a Poisson
process. Based on this viewpoint, we show that the jump volatility produces the Knightian uncertainty
and then we establish our model. We identify the factors which decide the Knightian premium and obtain
the price of European call option. We also find that ...