General theory of geometric Lévy models for dynamic asset pricing
General theory of geometric Lévy models for dynamic asset pricing
The geometric Lévy model (GLM) is a natural generalization of the geometric Brownian motion (GBM) model used in the derivation of the Black–Scholes formula. The theory of such models simplifies considerably if one takes a pricing kernel approach. In one dimension, once the underlying Lévy process has been specified, the …