2025/03/11 by Xinxin Jiang, Jiang, Xinxin
Economics, Econometrics and Finance · #Stochastic processes and financial applications #Capital Investment and Risk Analysis
paper · pdf · doi:10.48550/arxiv.2503.08666
This paper provides evidence that stock returns, after truncation, might be modeled by a special type of continuous mixtures or normals, so-called q-Gaussians. Negative binomial distributions might model the counts for extreme returns. A generalized jump-diffusion model is proposed, and an explicit option pricing formula is obtained.