Title :
Insurance Accurate Calculation Method of Option Pricing Submitting to Jump-Diffusion Process
Author :
Qi-wen, ZHANG ; Liang, KONG
Author_Institution :
Northeast Agric. Univ., Harbin
Abstract :
The paper introduces a new method of option pricing which is insurance accurate calculation. It is to deal with the problems of option pricing under the unbalance, arbitrage existing and incomplete circumstance. Meanwhile this paper transforms option pricing into a problem of equivalent and fair insurance premium. This approach is valid even when arbitrage exists and market is incomplete and unbalanced. It is proved that subject matters with saltant price like agricultural product can be priced well by pricing model of jump-diffusion process, and in this paper, "abnormal" fluctuate of price is described by renewal process which is more general than Poisson process, and jump-diffusion price model is based on it, and its renewal interval is described by the Gamma distribution.
Keywords :
insurance; pricing; agricultural product; insurance accurate calculation method; jump-diffusion process; option pricing; price fluctuation; saltant price; Conference management; Engineering management; Finance; Fluctuations; Geometry; Insurance; Investments; Mathematics; Pricing; Stochastic processes; insurance accurate calculation; jump-diffusion process; option pricing; renewal process;
Conference_Titel :
Management Science and Engineering, 2007. ICMSE 2007. International Conference on
Conference_Location :
Harbin
Print_ISBN :
978-7-88358-080-5
Electronic_ISBN :
978-7-88358-080-5
DOI :
10.1109/ICMSE.2007.4422115
