Gram-Charlier Processes and Applications to Option Pricing
A Gram-Charlier distribution has a density that is a polynomial times a normal density. For option pricing this retains the tractability of the normal distribution while allowing nonzero skewness and excess kurtosis. Properties of the Gram-Charlier distributions are derived, leading to the definitio...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2017-01-01
|
| Series: | Journal of Probability and Statistics |
| Online Access: | http://dx.doi.org/10.1155/2017/8690491 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1832553694064803840 |
|---|---|
| author | Jean-Pierre Chateau Daniel Dufresne |
| author_facet | Jean-Pierre Chateau Daniel Dufresne |
| author_sort | Jean-Pierre Chateau |
| collection | DOAJ |
| description | A Gram-Charlier distribution has a density that is a polynomial times a normal density. For option pricing this retains the tractability of the normal distribution while allowing nonzero skewness and excess kurtosis. Properties of the Gram-Charlier distributions are derived, leading to the definition of a process with independent Gram-Charlier increments, as well as formulas for option prices and their sensitivities. A procedure for simulating Gram-Charlier distributions and processes is given. Numerical illustrations show the effect of skewness and kurtosis on option prices. |
| format | Article |
| id | doaj-art-8679f47c23bc42838642767d8548ed62 |
| institution | Kabale University |
| issn | 1687-952X 1687-9538 |
| language | English |
| publishDate | 2017-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Probability and Statistics |
| spelling | doaj-art-8679f47c23bc42838642767d8548ed622025-02-03T05:53:30ZengWileyJournal of Probability and Statistics1687-952X1687-95382017-01-01201710.1155/2017/86904918690491Gram-Charlier Processes and Applications to Option PricingJean-Pierre Chateau0Daniel Dufresne1Faculty of Business Administration, University of Macau, MacauMontreal, QC, CanadaA Gram-Charlier distribution has a density that is a polynomial times a normal density. For option pricing this retains the tractability of the normal distribution while allowing nonzero skewness and excess kurtosis. Properties of the Gram-Charlier distributions are derived, leading to the definition of a process with independent Gram-Charlier increments, as well as formulas for option prices and their sensitivities. A procedure for simulating Gram-Charlier distributions and processes is given. Numerical illustrations show the effect of skewness and kurtosis on option prices.http://dx.doi.org/10.1155/2017/8690491 |
| spellingShingle | Jean-Pierre Chateau Daniel Dufresne Gram-Charlier Processes and Applications to Option Pricing Journal of Probability and Statistics |
| title | Gram-Charlier Processes and Applications to Option Pricing |
| title_full | Gram-Charlier Processes and Applications to Option Pricing |
| title_fullStr | Gram-Charlier Processes and Applications to Option Pricing |
| title_full_unstemmed | Gram-Charlier Processes and Applications to Option Pricing |
| title_short | Gram-Charlier Processes and Applications to Option Pricing |
| title_sort | gram charlier processes and applications to option pricing |
| url | http://dx.doi.org/10.1155/2017/8690491 |
| work_keys_str_mv | AT jeanpierrechateau gramcharlierprocessesandapplicationstooptionpricing AT danieldufresne gramcharlierprocessesandapplicationstooptionpricing |